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Operator:
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Ladies
and gentlemen, thank you for standing by and welcome to the Barrick
Gold
conference call
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During
the presentation, all participants will be in a listen-only mode.
Afterwards, we will conduct a question and answer
session.
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At
that time if you have a question, please press the 1 followed
by the 4 on
your telephone.
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As
a reminder this conference is being recorded, Monday, October
31,
2005.
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I
would now like to turn the conference over to Greg Wilkins, President
and
Chief Executive Officer.
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Please
go ahead.
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Gregory
Wilkins:
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Well,
thank you very much.
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Well
good morning everyone and thank you for joining us on this
call. It’s
certainly short notice and so we appreciate you making the
time available
to listen to it.
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We’re
including some news media on the call and members of the public
on the
Webcast in a live listen-only basis this morning.
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Before
we get going, let me just deal with the forward-looking statement
disclaimers. Of course, we’ll be making some forward-looking statements
during the course of this conference call.
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And
for a complete discussion of the risks and uncertainties and
the factors
which may lead to our actual financial results and performance
being
different than the statements contained in our forward-looking
statements,
please refer to our year-end report and our most recent AIF
filings.
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Joining
me this morning in Toronto are the usual suspects. With me,
I’ve got Peter
Kinver, Jaime, Alex Davidson, and Pat Garver. And of course,
we’re all
going to be available to answer questions after the
presentation.
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This
is clearly a huge day for Barrick. This morning, we announced
an offer to
acquire all of the issued and outstanding shares of Placer
Dome in a
transaction valued at $9.2 billion.
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We
also announced an agreement with Goldcorp to on - sell certain
assets for
another $1.35 billion and of course that’s an important component to
raising the cash for the bid that we are
making.
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We
believe that today marks an opportunity for Barrick and Placer
to combine
our assets and our people and our projects and deliver value
to all of our
shareholders.
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Over
the last couple of years, we’ve had an internal focus as you know. We’ve
been focusing on improving our operating performance, managing
our cost in
a challenging environment, reorganize the business to be
more effective
and responsive in how we deal with it and of course, we’ve been building
projects.
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Last
Thursday, we released our third quarter results. And item-by-item,
they
document the bottom-line impact of the management team and
as
demonstrated, the operational and development expertise that
we
have.
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Our
team and our employees worldwide have worked together to
deliver these
terrific results and bringing in new mines into production
and reducing
our cost and finding and growing our reserves and our
resources.
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The
time I think is right for this transaction with Placer Dome.
With our
proven experience and our financial strengths, we are really
setting out
to take Barrick to the next level.
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It
is the right time to combine the assets, the people, and
the projects to
form a leading Canadian gold-mining company best able to
compete on the
world stage.
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Let
me just quickly walk you through the transaction
summary.
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We
have put forward what we think is a full and fair offer of
$20.50 per
share US, or three quarters of one share of Barrick plus
5 cents in cash,
subject to pro-rating based on the maximum cash and amount
- a maximum
cash amount
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| of approximately $1.2 billion and a maximum number of Barrick shares to be issued of 303 million shares. | |
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This
represents a 27% premium to Placer’s average trading price over the last
ten days. And in total, this bid is valued at $9.2 billion
or $9.5 billion
on a fully-diluted basis.
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Following
the transaction, the ownership of Barrick will be 65% of
existing Barrick
shareholders and 35% of Placer Dome shareholders, again
on a fully-diluted
basis.
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Barrick’s
offer to acquire Placer by way of a 35-day takeover bid.
Barrick will
formally request the list of Placer Dome shareholders today
and expects to
mail the takeover bid documents to Placer shareholders
as soon as
possible, following the receipt of the shareholder
list.
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Placer
has a legal obligation to provide that list within ten
days of our request
and the offer will be opened for 35 days following the
mailing dates of
our offering circular.
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The
offer will be subject to certain conditions of completion.
The key
condition is a tendering of not less than two-thirds of
the Placer Dome
common shares, again, on a fully-diluted basis. Other conditions
include
receipt of necessary regulatory clearances and of course
the absence of
any material adverse changes.
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As
I mentioned, we also entered into an agreement with Goldcorp,
under which
we will sell to Goldcorp Placer Dome’s Canadian assets and an interest in
the La Coipa silver mine and a 40% interest in the Pueblo
Viejo
development project.
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And
of course, some compensation will be received with respect
to certain of
Placer Dome’s liabilities for a total cash consideration of about
$1.35
billion.
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But
really, the heart of this thing is really why do we want
to do this
transaction, what are the highlights and why is it going
to create value
for the Barrick shareholders.
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Well
the key is that we can deliver value from the assets,
people, and projects
that Placer has and in combination with Barrick’s assets, people, and
projects, we can build a powerhouse company.
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This
transaction is expected to be accretive on all major
financial metrics --
on net asset value, on earnings, and on cash flow.
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It
is also accretive to reserves, resources, and production
on a per share
basis. And it will consolidate the gold industry’s largest suite of
projects and exploration properties under a company that
has strong
management, significant experience, and proven capabilities
to get these
projects built.
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We
also have the financial strength to support these projects
without further
equity dilution.
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Our
offer to Placer shareholders combined with our agreement
with Goldcorp
recognizes that many Barrick, Placer, and Goldcorp’s assets are in close
proximity.
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Jointly,
we expect to capture about $240 million of annual synergies
as a result of
this transaction -- substantial to say the least. And
we believe it is the
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| maximum that anyone could realize as a result of the overlapping jurisdictions. | |
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This
deal represents significant value creation for Barrick.
Not only will we
increase pro forma reserves, resources, and production
in absolute terms,
but it’s accretive on a per share basis as you can see in
the
chart.
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Pro
forma reserves increased 22%. Pro forma resources increased
137%. These
pro forma figures are based on the 2004 year end reserves
of both
companies, but subsequent updates that we’ve seen from the Placer public
information.
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Pro
forma 2005 production increases by 12% per share, including
the copper
production from Zaldivar.
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These
production numbers are based on company estimates and
exclude the Placer
Dome production related to the Canadian assets in La
Coipa, which we
intend to sell onto Goldcorp.
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Copper
production, reserves, and resources have been converted
to the gold
equivalent using $450-gold and a $1.20 per pound of
copper.
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The
above resource calculations do include Cerro Casale.
Although we know that
Placer has announced a tentative agreement to sell
their interest, but we
do welcome the opportunity to take a second look at
it and to try to
provide some value through synergies that we maybe
able to bring uniquely
in Chile.
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Out
of these gold reserve positions in the marketplace,
the slide shows that
the pro forma reserves increased 68% on an absolute
basis to 150 million
ounces
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| in the proven and probable category and to 167 million ounces on a gold-equivalent basis with copper. | |
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The
combined company becomes the industry leader in reserves,
but more
importantly the strong reserve base serves as a foundation
for future
production.
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One
hundred seventeen million ounces of these reserves
will be at the existing
operating mines, and 33 million ounces will be in
the
projects.
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From
a production standpoint, to illustrate the size of
the company you can see
how the production will be at the senior - the largest
amount of the peer
group.
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Barrick
will have pro forma gold production of something
like 8.3 million to 8.4
million ounces of gold and another 1 million ounces
of gold equivalent
production measured in the copper equivalent.
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The
combined company will have the industry’s largest production base in a
rising gold-price environment.
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Operating
cash cost, as you can see from the slide, we are
currently the lowest cost
senior producer. We had a great third quarter and
remain on track with our
guidance of about $225 an ounce.
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After
integrating Placer’s mines, we do expect pro forma 2005 cost of $245
to
$255 an ounce and - (unadjusted) for the synergies
that we hope to achieve
through the operations.
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Again,
the combined company will be the lowest of the
senior - lowest cost
producer of the seniors and we intend to be able
to try to work on
bringing those costs down further.
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And
perhaps one of the most exciting elements of this
transaction is the
unrivaled pipeline of projects for sustainable
growth into the
future.
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As
you can see this building-block on the slide, we
really have brought - as
we brought in three new mines this year, we will
have a forthcoming in the
first quarter of next year and then a continuous
program of additional
projects going out to 2009 and beyond.
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By
combining the two companies, our shareholders will
benefit from the
existing pipeline and Placer pipeline which has
a clear fit in terms of
synergies and in terms of timing.
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We
believe that our near-term growth prospects combined
with the longer-term
projects managed by one highly skilled and experienced
team creates an
unbridled opportunity for Barrick going forward.
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In
the next slide you can see the asset-base and the
diversification. As you
can see, we will have a well-diversified mix of
production and reserves
worldwide. And it’s important and it’s the first real signal here that you
can see where the overlap exist, as we blend the
reserves of both
companies together, the distribution improves but
still remains largely in
the same proportions in terms of the same areas
of
operation.
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Furthermore,
Goldcorp’s assets in Ontario fit very well with Placer Dome’s assets and
this is one of the key reasons why Barrick and
Goldcorp got together in
pursuing this bid.
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It’s
important and it creates a significant opportunity
as we believe that the
regional business unit structure that Barrick
put in place about 18 months
ago will work well to bring the integration of
Placer’s business in line
with Barrick’s.
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From
a financial point of view, we’ve taken a look at the pro forma numbers.
This is a slide that demonstrates the last 12
months ending September 30,
2005, adjusting for the sale of Goldcorp’s assets.
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You
can see the strength of the revenue at $3.7 billion,
EBITDA of $1 billion,
a cash position of $2.4 billion, and a net debt
position of $0.7 billion.
And with a market capitalization of $21.8 billion,
it will be the largest
and strongest company in the industry capable
of delivering on the
pipeline of growth.
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The
combined operations will be effectively managed
through Barrick’s existing
regional business units. You can see from the
map the extent of the
overlap of the operations.
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Obviously,
very strong in United States around Nevada in
the Carlin Trend, Cortez
Hills, and Goldstrike, down in South America,
in Tanzania, and in
Australia, we’ll have four-diamond positions in the world and
in - a very
significant amount of overlapping opportunities
which creates the
opportunity for synergies.
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After
the completion of the transaction, of course,
we will remain headquartered
here in Toronto, but we will consolidate an exploration
in technical
services group in Vancouver.
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Our
global operations are divided into the business
units in order to promote
local management and operating and business
opportunities that are
tailored to the individual regions and we think
that we can add value to
Placer’s operations by combining it with ours.
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When
you look at how close the combined companies
operations are, you can see
the significant synergy potential of bringing
these two companies
together.
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We
also have an excellent track record of building
large scale projects. In
the past ten years, we have completed eight
major development projects,
and in 2006 our ninth, the Cowal mine will
be
commissioned.
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We’ve
recently built a gas-fired power plant to support
our Goldstrike operation
in Nevada.
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The
projects built over the past 20 months were
done so, in what is accepted
to be one of the most challenging constructed
- construction environment
in a long time. And we did them on time and
very near
budget.
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While
we haven’t been immune to cost pressures, our team has
done an excellent
job of mitigating their effects.
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We
believe that the systems that we have in place
to manage large scale
development projects, combined with the collective
experiences of the team
that we have assembled at Barrick will be very
valuable for advancing
Placer’s projects.
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The
same attention to detail that goes into our
development project management
also goes into our day-to-day operational activities
at our
sites.
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Through
overall cost control and financial risk management,
we have managed to
remain the lowest cost senior gold producer.
And our third quarter results
demonstrate that, with our costs coming in
at $210 an ounce or some $50
per ounce lower than our peer group.
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Our
expert team - our exploration team also has
a very successful track record
as you know, having discovered Lagunas Norte,
the largest grassroots
discovery to occur in the last ten years.
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We
are very excited about combining our strengths
with those of another
Canadian-based gold mining company, one that
has a long history of
success, and a pool of mining expertise and
its people, its miners, its
engineers, its geologists, its metallurgist,
financial folks. And so
combining it with Barrick’s team will make a very strong team to attack
the challenges on the international scale.
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The
synergies are very significant in this transaction.
We estimate through
our preliminary evaluation some $200 million
per annum.
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Barrick’s
experienced team has taken a look at operations,
exploration, procurement,
of course G&A, finance and tax, to see where we think
that we can
optimize and unlock synergies.
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In
the operations, we can optimize and share
mining and processing
infrastructure in Nevada, Australia, and
Tanzania.
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For
example in Nevada, once we are able to take
a closer look at the
operations, we believe that the treatment
of carbonaceous ores, refractory
ores can be processed at
Goldstrike.
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In
Western Australia, we plan to look at optimizing
the various roasting
facilities at the mines in the Kalgoorlie
district.
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Implementing
best practices at all locations will result
in lower operating
cost.
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After
we did the merger with Homestake, we established
an operational review
team to go out and take a look at all of
the operations on a
multidisciplinary basis to see how we can
improve the operations and
reduce costs.
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This
experience has been something that we carried
forward in our own
operations and we look forward to looking
at Placer’s operations through
the same lens.
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We
believe that we can reduce energy cost
through joint infrastructure. In
Tanzania, we are looking at opportunities
to build a power plant that
would serve all of the mines in that district.
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In
Nevada, we are currently commissioning
the gas-fired power plant and we
expect to save about $10 an ounce in Goldstrike’s cost. We would then look
at the possibility of extending the power
plant to supply Placer Dome’s
mines in the same jurisdiction.
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Of
course we can do reduce inventory levels.
Kalgoorlie mines are in very
close proximity and can share inventories.
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In
exploration, we plan to consolidate our
land position on very prospective
belt and prioritize our exploration projects
pipeline.
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In
procurement, we can generate savings
from improved purchasing power.
Reagents for example, we believe we can
save anywhere from 1% to 4% given
extra volume.
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In
G&A, elimination of duplicating - duplicate
office services and
overheard in all of the regions and shared
business services will lead to
significant savings.
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For
example in Tanzania, we have a significant
overlap with each handling our
own respective transport, port clearance,
and other services in Dar es
Salaam.
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We
could share shipping containers of transport
of supplies and materials,
and we would be able to save time and
effort in port clearance of
containers and resources.
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On
the finance and tax side, again, tax
synergies in overlapping
jurisdictions. For example, Zaldivar
is paying cash taxes in Chile and we
are incurring expenses which can be offset
against some of those
profits.
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We
have a lower cost of capital which we
can bring to bear on the overall
organization and we have opportunities
for debt
optimization.
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And
on the project side, we have the transfer
of the - the ability to transfer
development team’s equipment and knowledge through sequential
development
of the project pipeline.
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In
essence, we believe that because of the
long-term scale and size of the
project pipeline, we can actually bring
in-house much more of the project
management skill and reduce very significant
capital
cost.
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And
of course I mentioned earlier that
Goldcorp expects to realize synergies
in the area of $30 million to $40 million
per annum, which is again
something that the Placer Dome shareholders’ benefit through the price
that has been negotiated.
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Our
process at arriving at these synergy
estimates was done by taking a look
at each of our own professionals in-house
looking at their respective
areas, looking at our business, understanding
the operating conditions in
each of the regions, and then making
a - doing an analysis on where we
believe we can save some of this money.
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Of
course, it will be refined as we gain
more information because the initial
evaluation is based on publicly-available
information.
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We
expect to realize synergies almost
immediately but it will take until
2007
to get a full-year’s run on those synergies.
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So
I’d like to turn it over to Alex to talk
a little bit more about the
exploration activities and how we can
take advantage of the combination of
the areas to improve our results.
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Alex
Davidson:
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Good
morning, everyone.
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The
exploration opportunities of this new
combined company are especially
exciting. Barrick will have a reserve
and resource base of over 200
million ounces of gold. But more importantly,
we will have strong and
extensive quality land positions in
multimillion ounce camps and districts
that will be able to prioritize and
streamline the exploration project
pipeline of both companies.
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Barrick
already has a world-class exploration
team with a proven track record of
discoveries. The combined team will
integrate the best of Placer’s Minex
and new mine exploration efforts
with our team to more effectively
add
ounces around existing operations,
add ounces around development projects,
and it will have enhanced capabilities
to find new ounces in emerging
regions. It will be a juggernaut
of an exploration
team.
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Also,
both Placer and Barrick carryover
search and development in exploration
technology in areas such as geophysics,
remote sensing, geochemistry, and
ore deposits modeling.
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The
merging of these R&D teams and their efforts will undoubtedly
(need)
new and improved ways of finding
gold. In fact, the merging of the
two
company’s R&D activities will also lead to new
advances in underground
and open-pit mining, mineral processing,
and environmental
management.
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Let
me show you now how great a fit our
operations, projects, and exploration
positions are in a few key regions.
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Barrick
will have interest in seven mines
and development projects in Nevada.
We’ll have reserves and resources of
over 46 million ounces and pro forma
2005 production from Nevada would
be 3.1 million
ounces.
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As
you can see from this map, the new
company will have strong land positions
on each of the major trends in Nevada
-- the Carlin, the Getchell, and
the
Battle Mountain Trend.
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Betze-Post,
Meikle, Ren, Storm, and South Arturo,
where we currently have four rigs
turning and numerous exploration
properties form the quarter of
Barrick’s
holdings on the Carlin Trend.
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Turquoise
Ridge, Pinson, Preble and exploration
properties lie on the Getchell
Trend, while Placer’s dominant land position in the
pipeline and Cortez
Hill area complements Barrick’s land positions at Marigold and
East
Archimedes on the Battle Mountain
Trend.
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And
both East Archimedes and Cortez
Hills are development projects
scheduled
for production in the coming years.
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Barrick
entered the gold mining industry
in Tanzania in 1999 with our purchase
of
Sutton Resources. Since that time,
we have put the Bulyanhulu and
Tulawaka
Mines into production and we’re currently developing the Buzwagi
and
Kabanga projects.
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Placer
Dome acquired its interest in the
North Mara mine and its exploration
properties in 2003. Together, the
companies who have reserves and
resources of almost 20 million
ounces of gold in Tanzania, an
extensive
and quality suite of exploration
properties in the Lake Victoria
Greenstone Belt and an exploration
team made up of the best Tanzanian
geologists.
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2005
estimated production for the pro
forma company in Tanzania is 640,000
ounces. Tanzania is a hugely prospective
place for new gold deposits, as
the recent discoveries at Buzwagi
and North Mara attest and Barrick
will
be uniquely positioned to find
and develop more gold in Tanzania
in the
coming years.
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With
reserves and resources of almost
24 million ounces and 2005 pro
forma
estimated production of almost
2 million ounces, Australia will
be a
cornerstone of the new Barrick.
It will have seven operating
assets in
West Australia alone, along with
commanding land positions in
the
Kalgoorlie, Laverton, Agnew,
and (south) Yandal Belt.
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Placer
and Barrick both have excellent
exploration teams in Australia.
Combining
them will create a team that
will be uniquely positioned to
deliver
exploration successes not only
from Australia, but also from
our
continuing efforts around Porgera
and PNG and in the rest of
Asia.
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One
of Barrick’s core districts is a 3,000 square
kilometer Frontera District
that straddles the Chile-Argentine
border. We currently have over
30
million ounces of gold reserves
and resources here at our Pascua-Lama
and
Veladero deposits.
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Barrick
has demonstrated with the recent
opening of Veladero an expertise
in
exploring and finding and developing
gold deposits in the high Andes.
The
Cerro Casale project lies some
150 kilometers north of Pascua-Lama
and
synergies, our plant construction
management between the two projects
are
inevitable.
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These
are the kinds of projects that
a company of the scale and breadth
of the
new Barrick can undertake and
we believe that Barrick’s expertise and high
sulfidation deposits and Placer’s expertise in porphyry deposits
can be
effectively used in a combined
exploration team in Chile and
South
America.
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In
short, the consolidation of the
two companies’ complementary land packages
brings together the most prospective
ground within the world’s top gold
belt under one highly talented
and experienced exploration
team.
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And
I’ll turn it back to Greg.
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Gregory
Wilkins:
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Thanks,
Alex.
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Don’t
worry guys, we’re just about near the end.
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Of
course we have been talking
a lot above how we see - how
this is going to
create a great opportunity
for the Barrick shareholders
and that’s our key
focus. But this is also a great
value creation opportunity
for the Placer
Dome shareholders.
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Clearly,
the premium in the bid delivers
immediate results, but by combining
the
two companies together and
then the Placer Dome shareholders
taking back
shares of Barrick, they too
can enjoy the benefits of what
we expect to be
able to create through this
combination.
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The
combination is really more
than the sum of its parts and
we know how to
capture the synergies on a
global scale and build on the
complementary
strength in the assets.
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And
there’s unique advantages to our
bid; let me just highlight
them.
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First
off, we have been able to negotiate
a very good transaction with
Ian
Telfer at Goldcorp and put
forward a combined offer that
does create value
for all shareholders. We believe
that our combined bid with
Goldcorp
offers some very specific advantages
to Placer
shareholders.
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We
also believe that we have an
advantage with respect to execution
timing.
Of course, neither Barrick
nor Goldcorp require a shareholder
vote
to
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| complete this transaction. We can complete it quickly and we can be in unlocking the synergy potential that awaits us. | |
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This
is an all-Canadian transaction
with three parties to the
deal being based
in - here in Canada, so no
Investment Canada approval
is
required.
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We
have a strong partner in
Goldcorp. And by selling
the assets, unlocking
synergies, and using the
cash to help secure the bid,
will make the bid
that much more attractive
to the Placer shareholders.
And of course, we
have the opportunity as being
a Canadian bidder to on-sell
the assets to
Goldcorp on a tax-efficient
basis.
|
|
|
On
our tax rate going forward,
for a Canadian-based purchaser,
one that’s
domiciled in Canada, continues
to enjoy the benefits of
the tax structures
that are in place.
|
|
|
We
have the ability to manage
and reduce the hedge position
effectively and
we will continue on our path
to reduce the combined hedge
book. And we
will have a significant component
of cash in the bid to ensure
that there
are immediate benefits received
by the Placer
shareholders.
|
|
|
In
summary, we think this is
a terrific transaction. Placer
and Barrick are a
great fit. They are great
synergies. It creates a great
company and it’s a
company that has great projects.
|
|
|
And
so I’m looking forward to the
combination of these two
enterprises
creating compelling value
for both Barrick and Placer
shareholders.
|
|
|
And
with that, I’d like to open it up to
questions.
|
|
Operator:
|
Thank
you.
|
|
Ladies
and gentlemen, if you would
like to register a question,
please press the
1 followed by the 4 on
your telephone. You will
hear a three-tone prompt
to acknowledge your request.
|
|
|
If
your question has been
answered and you would
like to withdraw your
registration, please press
the 1 followed by the 3.
|
|
|
If
you are using a speakerphone,
please lift your handset
before entering
your request.
|
|
|
One
moment please, for the
first question.
|
|
|
Our
first question comes from
the line of John Hill of
Citigroup.
|
|
|
John
Hill:
|
Good
morning everyone and congratulations
on a very exciting
transaction.
|
|
I
was just wondering if you
could touch briefly on
some of the more
controversial assets in
the mix being your thoughts
on South Deeps and -
as well to some of your
commentary on potential
synergies with Cerro
Casale suggest you might
revisit the strategy that’s in place
now.
|
|
|
Gregory
Wilkins:
|
Sure.
John, it’s Greg.
|
|
I’ll
start and then others will
kick in.
|
|
|
On
South Deeps, you know,
we are quite interested
in the turnaround that
seems to be occurring down
at South Deeps. You know,
we are looking
|
| forward, you know, to see, you know, what the potential might be that can be developed over some time. | |
|
We
think that there’s potentially similar
types of problems that
they’re
experiencing that we’ve been working through
at Bulyanhulu and so
we can
perhaps combine the learnings
from each of those situations
to add value
to both of them.
|
|
|
With
Cerro Casale again, you
know, it’s perhaps, you know,
not completely
within our control, but
- having announced the
potential transaction.
But
we do think that there
are some synergies between
Cerro Casale and our
operations in Chile.
And perhaps if we have
a chance, we might take
a
fresh look at that and
see whether or not some
additional value can
be
created.
|
|
|
John
Hill:
|
Very
good, thank you.
|
|
Operator:
|
Our
next question comes from
the line of Mike Durose
of Scotia
Capital.
|
|
Michael
Durose:
|
(Unintelligible).
Just a couple of quick
questions.
|
|
First
of all, I mean, this
is a hostile bid against
Placer Dome. I’m just
wondering Greg if you’ve actually tried to
make this a friendly
transaction. Did you
in fact approach the
board of Placer and Peter
Tomsett and have you
spoken with them this
morning and what’s his
reaction, if you have?
|
|
|
That’s
the first question.
|
|
|
Gregory
Wilkins:
|
Sure.
|
|
We’ve
had a number of conversations
over the years and
you know, I’ve never
really had much traction
from them. We did reach
out to Rob Franklin
this
morning and let him
know that this was
coming and you know,
we’ve
encouraged him to -
and the Placer board
through him to reach
out and have
conversations with
us and we would welcome
the opportunity to
do
that.
|
|
|
Michael
Durose:
|
Okay.
I guess the second,
sort of follow-up from
that is just in terms
of board
composition. As you’ve looked at Placer
Dome, is there anybody
on that
board that you would
sort of like to keep?
|
|
I
know it’s sort of (is not one)
you can directly answer,
but just generally
speaking. And also
maybe just key people
within the Placer organization
that you think would
be synergistic with
respect to whether
- whether or
not they could add
value to the combined
entity.
|
|
|
Gregory
Wilkins:
|
Well
Placer has an excellent
board and so we certainly
have to consider, you
know, recruiting board
members in the future
that, you know, can
do a
really good job for
the combined company.
|
|
With
respect to people,
clearly, you know,
this industry is -
(there’s an odd)
of challenges in terms
of recruiting and retaining
people and so, you
know, we look at Placers
having, you know, deep
highly qualified
experienced people
and so we really look
forward to working
with
them.
|
|
|
Michael
Durose:
|
Okay.
Just another question,
just leading down to
the sort of path of
the hedge
book, just wondering
if you could - I mean,
you did mention in
your
commentary that you’d like to reduce it
using the same strategy,
but I’m
just wondering, number
1, are there similar
counterparties to the
various
books or are you aware
of it?
|
|
And
number 2, is there
a way to maybe bring
that combined book
down quicker as
you sort of engage
on along this path?
|
|
|
Jamie
Sokalsky:
|
Mike,
it’s Jamie.
|
|
We’ve
done quite a bit
of review of their
hedge book to their
public disclosure
and through analyst
reports. Their disclosure
is quite
good.
|
|
|
We
think that it’s likely that their
counterparties are
very similar to the
counterparties that
we use. We have about
18 counterparties
and I suspect
that most of the
counterparties will
be the same.
|
|
|
In
essence, we’re going to - we
feel that we have
a pretty good understanding
of the hedge position
and we’re going to continue
the work to not only
bring the overall
position down, but
also to simplify
it.
|
|
|
They
have about 8 million
ounces of gold hedged,
in that there are
some
options, transactions;
that we’re - we’re definitely going
to look at -
simplify that. And
once we have a better
understanding of
their
commitments and who
the hedge agreements
are with, we’ll certainly have
a
better idea of what
we can do with it
and that we’re planning to combine
the book.
|
|
|
Their
hedge position is
about the same percentage
of their reserves
as ours. But
again, once we got
a better understanding
and go in there,
we can decide
how we handle it.
But at the end of
the day, we are definitely
still on
track to reduce the
hedge position --
that is our objective.
And overall,
we will do that with
both our position
and their position
and honor any
commitments that
Placer has in their
book to deliver
ounces.
|
|
Michael
Durose:
|
Okay.
And just one last
question, I’ll let somebody
else ask questions.
But
Greg, just in terms
of the 200 million
in synergies when
you identified,
I
think, 1, 2, 3,
4 different areas
of operations,
exploration, procurement,
G&A, could you give
us a percentage
breakdown of where
you see those
synergies coming
from?
|
|
Gregory
Wilkins:
|
You
know, there’s a significant
amount of synergies
in the operations,
that
would be the largest
component of it.
We see some synergies
in
exploration, you
know, which maybe
the second largest
in
ranking.
|
|
And
then, you know,
we have finance,
tax, G&A, you know, and
G&A
eliminating some
of the overlap
in the various
regions that we
operate. So
I think it would
be in that order.
|
|
|
Michael
Durose:
|
Okay.
Okay, fair enough.
Thanks.
|
|
Operator:
|
Our
next question comes
from the line of
Victor Flores of
HSBC.
|
|
Victor
Flores:
|
Thank
you. Good morning.
|
|
First
question goes to
the number of assets
that you’re acquiring and
I think
it’s fair to say that
back when Barrick
acquired Homestake,
one of the
impacts of that
transaction was
that there were
lots of assets
that really
diluted management
time and as a consequent
performance of
some of those,
asset suffered.
|
|
|
What
plans do you have
- or what plans
have you made to
make sure that
the new
assets that you
might be acquiring
here are adequately
managed and that
the performance
that you have delivered
recently from your
assets doesn’t
suffer as a result
of this
transaction?
|
|
Gregory
Wilkins:
|
Well
Victor, the key
thing for us
is that we re-establish
the organizational
structure in
the company to
address the issues
that occurred
through the
Homestake transaction
and that was
setting up the
regional business
unit
structure.
|
|
So
we have a regional
business unit
in Australia
and they’re well-positioned
to take over
the oversight
of the Australian
assets in Porgera.
We have a
North American
regional business
unit structure
centered in Salt
Lake City
and they can
very comfortably
take on the US
assets which
are primarily
in
Nevada, very
easy to fit into
it.
|
|
|
In
Tanzania, similar
situation, we
have the regional
business unit
and so
it’s a matter of
absorbing North
Mara.
|
|
|
So,
when we look
across the company
and we look at
the fit, we can
see that we
have the management
teams in place
to immediately
move in and take
over
the oversight
of those assets.
|
|
|
We
have through
the Homestake
transaction,
we had established
an organization
operating review
teams and these
are multidisciplinary
teams that go
out
and really do
a scrub of all
the assets and
that will be
happening
immediately after,
you know, we’re successful
with the
transaction.
|
|
Victor
Flores:
|
Great,
thank you.
|
|
Second
question goes
to Pueblo Viejo.
I mean, you
referred to
it in the press
release as
a world-class
asset. It looks
like quite
a large interesting
project. Why
are you selling
40% of
it?
|
|
I
mean, you
don’t, you know,
I’m trying
not to be
pejorative
here, but
you
don’t really
need Goldcorp’s help to
do this deal.
|
|
|
Gregory
Wilkins:
|
No.
But you know,
I think it’s important
that in -
that Goldcorp,
you know,
have - that
the transaction
between Goldcorp
and Barrick
be a good
transaction
for both
companies.
And you know,
Goldcorp
is interested
in
growth, as
well as we
are and I
think that
is a nice
place for
us to, you
know, to
work together.
|
|
Barrick
is going
to lead the
development
and you know,
we’ll build
it. You know,
it’s a little
bit of the
art of the
doable, if
you will,
Victor, and
what
I like to
have had
100%, sure
but you know,
I’d rather
have Goldcorp
as a
partner and
that’s - requires
a compromise
every once
in a
while.
|
|
|
Victor
Flores:
|
Fair
enough.
|
|
And
then just
finally,
coming back
to John’s question
about South
Deep, Placer
has been,
you know,
fairly or
unfairly
criticized
for having
a large
portion of
its reserves
in this asset.
|
|
|
And
certainly,
one of the
reasons if
you’re successful
here that
you’ll have
these reserves
is because
there’s going to
be a big
chunk of
South Deep
there. How
do you address
what, you
know, what
might become
a market
criticism
of Barrick
that was
previously
directed
at
Placer?
|
|
|
Gregory
Wilkins:
|
Well,
you know,
we’ll - at the
moment, you
know, I don’t have a
great answer
for
you because
it will take
some time
for us to
become involved
and then
to
understand,
you know,
some of the
challenge
and some
more depth
to see how
we could,
you know,
improve the
situation,
you
know.
|
|
We
have a
- I think
it’s a great
opportunity
on the
upside
potentially,
as
we’ve looked
at, you
know, the
assets
themselves
as a package,
you know,
we think
that there’s a good
potential
for value
creation
that we
can
great South
Deep to
perform
better.
|
|
|
Victor
Flores:
|
Great.
Thank you,
Greg.
|
|
Operator:
|
Our
next question
comes from
the line
of Steve
Butler
of Canaccord
Capital.
|
|
Steve
Butler:
|
Yeah,
good morning
gentlemen.
|
|
Question
again,
Greg, on
the synergies,
you said
exploration
is the
second
most
important
component
likely.
Would we
assume
therefore,
you know,
20% or
30% of
your overall
synergies
would be
exploration?
Is that
a reasonable
range?
|
|
|
Gregory
Wilkins:
|
You
know Steve,
we’re looking
at the
whole package
of synergies
and you
know,
it’s a, you
know, they’re spread
quite evenly,
you know,
throughout,
you
know, the
different
disciplines
that I
talked
about.
|
|
You
know, there’s a variety
of different
ways to
obtain
the synergies
and you
know, we
have the
opportunity
to reprioritize
some projects
and you
know,
we can
take some
redundancy
out of
some of
it.
|
|
|
You
know, so
there’s a - I
think that
what we
can do
is be just
as effective
in the
exploration
in terms
of replacing
the overall
reserves
at a lower
cost and
that had
led to
- we’re looking
at for
synergies
and
exploration.
|
|
|
Steve
Butler:
|
Okay.
|
|
We’re
talking
here
after
tax as
well?
|
|
|
Gregory
Wilkins:
|
The
200 million
is pre-tax.
|
|
Steve
Butler:
|
Oh,
200 million
is pre-tax,
okay.
|
|
In
terms
of -
you also
mentioned
Greg
that
Zaldivar
of course
is paying
cash
taxes
and therefore
your
expenses
otherwise
in Chile
(wouldn’t) be
able
to
go against
those
taxes
to reduce
them
there
in the
near
term.
|
|
|
So
we take
that
as Zaldivar
to be
a keeper
asset
or is
an asset
you haven’t
necessarily
found
a buyer
for yet?
|
|
|
Gregory
Wilkins:
|
No,
we like
the Zaldivar
asset.
It performs
very
well
and contributes
to our
earnings
and cash
flow,
it has
been
doing
for Placer
and you
know,
we
would
keep
it in
the portfolio.
|
|
Steve
Butler:
|
Okay.
And just
lastly
on Cerro
Casale
again,
I know
the timing
there
is such
that
Bema,
Arizona
Star
may very
well
get that
project
back
from
Placer
officially
in I
think
in the
month
of December,
so the
timing
is quite
tight
here.
|
|
Would
you just
let that
transaction
still
occur
or is
there
some
chance
to
renegotiate
that
but only
if of
course
you take
control
of
Placer?
|
|
|
Gregory
Wilkins:
|
Well,
you know,
at the
moment
we have
no ability
to influence
the outcome
of
those
negotiations.
I do
think
that
there,
you know,
might
be through
the
synergies
and through
a fresh
look,
you know,
something
that
could
be
done.
|
|
But,
you
know,
unless,
you
know,
we
complete
the
transaction
before
that
transaction
is
completed
is
somewhat
beyond
our
control.
|
|
|
Steve
Butler:
|
Great,
okay.
Thanks
very
much,
Greg.
|
|
Operator:
|
Our
next
question
comes
from
the
line
of
Michael
Fowler
of
Desjardin
Securities.
|
|
Michael
Fowler:
|
Yeah.
Greg,
I got
two
questions.
|
|
Is
there
any
agreement
between
Barrick
and
Goldcorp
in
terms
of,
I don’t
know,
some
form
of
breakup
(fee).
I mean,
what
I’m getting
at
here
is
one
would
expect
Placer
Dome
to
go
and
search
for
a white
knight
and
would
that
restrict
Goldcorp
from
going
into
an
agreement
with
a third
party?
|
|
|
Gregory
Wilkins:
|
Yes,
they’re
exclusive
to
us.
|
|
Michael
Fowler:
|
Is
there
anybody
else
who’s exclusive
to
you?
|
|
Gregory
Wilkins:
|
No,
we’ve
only
announced
the
transaction
with
Goldcorp.
|
|
Michael
Fowler:
|
Great
stuff.
|
|
Now,
just
on
- I
remember
you
talking
about,
you
know,
Homestake
merger
and
basically
you
were
saying
that
acquisitions
of
this
scale
don’t really
make
an
awful
lot
of
sense.
But
now,
you’ve
done
this
transaction
and
you’re
talking
about
8.3
million
ounces
of
production
and
146
million
ounces
of
reserve.
|
|
Just
to
actually
replace
that
kind
of
-
those
ounces
is
tough
and
I
bet
you,
Alex
would
agree
with
that.
|
|
|
So
how
-
I
mean,
despite
the
fact
that
you’ve
got
all
these
great
pipeline
projects,
but
how
do
you
really
grow
in
the,
you
know,
when
you
get
to
such
a
size?
|
|
|
Gregory
Wilkins:
|
Well,
actually
on
the
growth
piece,
you
know,
the
way
I
look
at
it
is
that
it
hasn’t
changed.
You
know,
Placer
has
its,
you
know,
requirement
to
grow
from
this
space.
We
have
our
requirement
to
grow
from
our
base.
You
add
them
up
and
you
know,
we’re
busy
working
away
trying
to
do
that.
|
|
I
strongly
believe
that
the
combined
enterprise
is
much
more
likely
to
be
successful
in
that
reserve
replacement
game
than
if
we
continue
to
operate
independently.
|
|
|
There’s
great
synergies
in
the
land
positions,
as
Alex
has
talked
about,
other
synergies
in
terms
of
talents.
You
know,
we
believe
that
Placer
has,
you
know,
geological
expertise
in
areas
where
we
don’t
and
of
course,
you
can
always
talk
about
recruiting
and
so
on.
|
|
|
But,
I
think
the
fact
of
the
matter
is
when
you
put
the
companies
together,
the
chances
of
them
being
successful
in
that
goal
of
replacing
eight
odd
million
ounces
a
year,
you
know,
is
better
than
it
was
when
we’re
apart.
|
|
|
Michael
Fowler:
|
Okay,
thanks.
Any
comments
from
Alex?
|
|
Alex
Davidson:
|
Those
are
exactly
my
sentiments,
Mike.
We
look
forward
to
working
with
the
Placer
exploration
teams
and
their
Minex
and
New
Mine
exploration
and
I
|
| think it will be easier to replace and grow from our - from - as a combined team. | |
|
Michael
Fowler:
|
Okay,
thanks
very
much.
|
|
Operator:
|
Our
next
question
comes
from
the
line
of
Mark
Smith
of
Dundee
Securities.
|
|
Mark
Smith:
|
Yeah,
sorry.
All
of
my
questions
have
been
answered
at
this
point,
they
really
(circulated
ago).
|
|
Perhaps,
just
you
could,
Greg,
just
tell
us,
what
do
you
mean
by
exclusivity
for
Goldcorp?
Is
there
any
constraints
on
-
in
from
making
a
deal
with
Placer?
|
|
|
Gregory
Wilkins:
|
Well,
we
have
a
binding
agreement
with
Goldcorp
to
sell
the
assets
for
a
fixed
price
and
-
provided
that
we
complete
the
transaction
with
Placer.
And
they
can’t
do
anything
else
while
this
is
ongoing
and
there’s
a
tail
in
terms
of
time
for
which
you
couldn’t
go
and
talk
to
anybody
else
as
well.
|
|
So,
you
know,
I
mean,
I
think
the
real
thing
here
is
that,
you
know,
in
and
the
Goldcorp
folks
are,
you
know,
very
pleased
to
really
come
together
with
us
on
this
transaction
and
you
know,
we
think
we
have
a,
you
know,
a
very
high
likelihood
and
confidence
in
being
successful.
|
|
|
And
so,
you
know,
we’re
really
just
working
together
to
complete
the
deal.
|
|
|
Mark
Smith:
|
All
right.
Thanks
very
much.
|
|
Operator:
|
Our
next
question
comes
from
the
line
of
John
Tumazos
of
Prudential.
|
|
John
Tumazos:
|
Good
morning
and
congratulations
on
all
your
hard
work.
|
|
As
you
analyze
your
own
company
and
Placer,
many
things
have
changed
since
the
‘04
reserves
were
calculated
--
gold
and
copper
prices,
various
costs.
|
|
|
Did
you
analyze
the
combined
company
based
on
today’s
public
information
or
did
you
try
to
estimate
your
own
and
Placer’s
position
pro
forma
a
different
economic
(deck),
I
guess
you
can
pick
any
gold
price
up
to
500
or
copper
price
up
to
2
bucks
or
oil
and
gas
price
up
to
$70
and
$14
and
what
not.
|
|
|
I’m
not
sure
I
know
what
the
right
coefficients
are,
but
I
know
they’ve
changed.
|
|
|
Gregory
Wilkins:
|
John,
we
haven’t
gone
back
to,
you
know,
to
really
recalculate
the
reserves
on
different
metrics.
|
|
What
we
have
done
is
gone
and
looked
at
all
of
the
information
available
on
reserve,
studied
as
closely
as
we
can
on
the
Placer
side
to
look
for
downside
risks.
I
mean,
I
think
that
the
reserves
will
increase
if
we
use
our
metal
prices
and
cost
structures
and
so
on,
so
forth.
|
|
|
Our
focus
is
really
on
what
the
downside
potential
would
be.
|
|
|
And
similarly
with
the
operations,
you
know,
we
really
took
the
publicly
available
information
and
(back)
calculated
what
we
think
those
mines
will
do
at
what
cost
and
to
make
sure
that
it
hangs
together
with
the
reserve
calculations
in
terms
of
grades
and
(historical)
recoveries
and
so
on
to
make
sure,
you
know,
they
were
comfortable
that
there
aren’t
going
to
be,
you
know,
any
material
negative
surprises.
|
|
|
The
upside,
you
know,
will
come
to
us
and
that
will
be
fantastic.
|
|
John
Tumazos:
|
Thank
you.
|
|
Operator:
|
Our
next
question
comes
from
the
line
of
John
Bridges
of
JP
Morgan.
|
|
John
Bridges:
|
Morning
Greg.
Quite
a
formidable
growth
profile
you’re
developing
here.
|
|
On
Cerro
Casale…
|
|
|
Gregory
Wilkins:
|
(Unintelligible).
|
|
John
Bridges:
|
On
Cerro
Casale,
I’m
a
bit
confused
because
surely
Placer
has
got
a
tax
base
coming
off
Zaldivar
to
offset
against
Cerro
Casale
|
|
Gregory
Wilkins:
|
You
know,
all
I
can
tell
you
is
that
just
looking
at
the
public
information,
we’re
aware
that
they’re
paying
cash
taxes
in
Chile
from
Zaldivar
and
-
so,
we
don’t
have
enough,
you
know,
information
to
know
the
tax
structure.
|
|
We
just
-
we
do
know
that
we
are
-
are
incurring
current
expenditures
in
Chile
and
our
understanding
of
the
Chilean
tax
law
should
allow
us
to
be
able
to
structure
things
so
that
we’d
be
able
to
offset
those
expenses
against
those
revenue
streams.
|
|
|
John
Bridges:
|
Oh,
okay.
|
|
When
Newmont
did
this
big
deal
that
went
off
and
did
a
rationalization
of
its
assets
afterwards,
would
you
be
looking
at
doing
something
similar,
you
know,
after
I
think
the
-
after
(exiting)
out
the
asset
sell
to
Goldcorp?
|
|
Gregory
Wilkins:
|
You
know,
we’ll
-
post
closing,
we’ll
certainly
take
a
very
fresh
look
at
the
overall
portfolio
in
the
company
and
you
know,
see
what
makes
sense.
|
|
John
Bridges:
|
With
regard
to
synergies
and
people
change
and
that
sort
of
thing;
could
you
comment
on
the
perceived
fairness
of
the
exercise
you
did
when
you
merged
with
Homestake?
|
|
Gregory
Wilkins:
|
Well,
I
would
respect
the
synergies.
I
think
the
-
we
actually
found
more
synergies
than
we
originally
anticipated.
We
didn’t
find
them
necessarily
in
the
same
places
that
we
had
estimated.
|
|
And
I
think
the
same
will
be
here
-
similar
here.
We
had
tried
to,
you
know,
model
and
evaluate
on
a
relatively
conservative
basis,
you
know,
what
we
think
the
opportunities
are.
And
I’m
hopeful
that
the
nature
of
the
fit
between
the
companies
will
provide,
you
know,
additional
opportunities
for
further
synergies.
|
|
|
John
Bridges:
|
Yeah,
I’m
just
thinking
of,
you
know,
potential
pushback
from
management
and
I
think
you
touched
on
it
in
terms
of
bringing
in-house
project
development,
that
sort
of
thing.
|
|
But,
you
know,
I
was
just
wondering
more
in
terms
of
how
Placer
management
would
feel
they
would
be
sort
of
evaluated
in
a
combined
management
team.
|
|
|
Gregory
Wilkins:
|
Uh-huh.
|
|
Well,
you
know,
we’re
-
as
I
mentioned
in
my
comments,
I
mean,
people
are
in
short
supply
in
this
industry
and
so,
you
know,
we
really
look
at
-
at
the
combination
as
an
opportunity,
you
know,
to
bring
the
folks
from
Placer
into
|
| the fold and you know, obviously, you know, we will be looking, you know, for getting the right people in the right jobs and you know, getting the whole process of looking at our employee base, you know, to be improved to the extent we can, so we continue to work with a number of programs internally at Barrick and the Placer folks would fit into that program. | |
|
So,
you
know,
this
is
perhaps
-
I
view
it,
I
think,
as
a
much
bigger
opportunity
for
people
in
the
industry
to
be
part
of
a
great
Canadian
company
here
and
so
the
job
opportunities
will
improve
in
numbers
and
improve
in
quality.
|
|
|
John
Bridges:
|
Okay,
(Greg).
Good
luck.
|
|
Gregory
Wilkins:
|
Thank
you.
|
|
We’ll
take
one
more
call.
Ian
Telfer
is
going
to
be
starting
a
call
at
10
o’clock
and
so
to
let
everybody
go
off
and
participate
in
Ian’s
call,
we’ll
just
take
one
last
question.
|
|
|
Operator:
|
Thank
you.
|
|
Our
last
question
comes
from
the
line
of
Kerry
Smith
of
Haywood
Securities.
|
|
|
Kerry
Smith:
|
Thanks
operator.
Congratulations
Greg
on
your
efforts
to
try
and
create
another
world-class
Canadian
mining
company.
I
think
it’s
terrific.
|
|
I
just
had
one
question
on
the
regulatory
issues.
What
regulatory
issues
do
you
believe
would
be
needed
to
be
addressed?
You
say
you
don’t
need
Canadian
approval,
what
issues
would
have
to
be
covered
off
there?
|
|
|
Patrick
Garver:
|
All
right
Kerry,
this
is
Patrick.
|
|
We’ll
be
seeking
a
regulatory
consent
in
a
number
of
jurisdictions
either
in
which
-
either
of
the
companies
are
listed
or
in
which
they’ve
got
substantial
assets.
It’s
principally
competition
act
type
consent.
|
|
|
We
looked
at
the
transactions
pretty
carefully.
We
don’t
presently
see
any
impediments
to
obtaining
the
necessary
consents
or
approvals
to
get
the
deal
done.
We’re
optimistic
that
the
process
of
getting
the
necessary
regulatory
consent
is
not
going
to
delay
the
bid.
|
|
|
Given
the
nature
of
the
industry,
we
don’t
think
that
the
transaction
raises
any
serious
competition
type
issues
in
-
really
any
of
the
jurisdictions
that
we
have
to
deal
with.
|
|
|
So,
you
know,
the
bid
will
be
subject
to
getting
all
necessary
consents
and
approvals,
but
we
don’t
see
that
as
a
huge
problem.
|
|
|
Kerry
Smith:
|
Okay.
And
do
you
think
those
approvals
would
delay
the
35-day
regulatory
time
for
the
offer?
|
|
Patrick
Garver:
|
Well,
as
I
said
before,
we’re
pretty
optimistic
that
the
process
of
obtaining
the
regulatory
consent
is
not
going
to
get
in
the
way
of
bringing
the
bid
to
a
close
promptly.
|
|
Kerry
Smith:
|
Okay.
|
|
Okay,
that’s
great.
Thank
you.
Thanks
Pat.
|
|
Gregory
Wilkins:
|
Well,
thank
you
everyone
for
participating
with
us
in
the
call
this
morning.
Obviously,
you
know,
many
more
questions
will
come
to
mind
in
the
coming
hours
and
days
and
we
stand
open
for
as
many
questions.
|
|
Just
give
us
a
call
and
we
love
to
continue
to
have
a
dialogue
on
this
very
exciting
opportunity
for
Barrick.
|
|
|
Thanks
again.
|
|
|
Operator:
|
Ladies
and
gentlemen,
that
does
conclude
the
conference
call
for
today.
We
thank
you
very
much
for
joining
and
ask
that
you
please
disconnect
your
line.
|
| Important Notice | |
|
Barrick
plans
to
file
with
the
U.S.
Securities
and
Exchange
Commission
a
Registration
Statement
on
Form
F-8,
which
will
include
Barrick’s
offer
and
take-over
bid
circular.
Investors
and
security
holders
are
urged
to
read
the
offer
and
take-over
bid
circular,
regarding
the
proposed
business
combination
transaction
referred
to
in
the
foregoing
information,
when
these
documents
become
available,
because
they
will
contain
important
information.
Investors
may
obtain
a
free
copy
of
the
offer
and
take-over
bid
circular
when
they
become
available
and
other
documents
filed
by
Barrick
with
the
SEC
at
the
SEC’s
website
at
www.sec.gov.
The
prospectus
and
these
other
documents
may
also
be
obtained
for
free,
once
they
have
been
mailed,
on
Barrick’s
web
site
or
by
directing
a
request
to
Barrick’s
media
or
investor
relations
department.
|