Can Barrick retake the LatAm gold crown?

Barrick Gold CEO Mark Bristow aims to recover the company’s lost crown as leader in the Latin American gold industry.

But the miner has a long way to go to catch up with rival and partner Newmont.

While Barrick has a string of Latin American projects which could deliver growth in the coming years, M&A could be needed for it to regain its position as top producer, according to BNamericas analysis.

Bristow (in photo) expressed his aims at the Gold Forum Americas online event this month.

“LatAm now, I mean Barrick used to be a leader in South America, certainly in the gold industry and it’s lost that position.

“It’s my determination to put us back there, and we have now got a solid team.”

HOW DOES BARRICK SHAPE UP?

Toronto-based Barrick is firmly in the top three gold producers in Latin America – but some way from top spot.

Attributable Latin American production was 378,000oz gold in H1, comprising 254,000oz from Pueblo Viejo in the Dominican Republic, a 60:40 JV with Newmont, and 124,000oz from Veladero in Argentina, a 50:50 JV with Shandong Gold.

The figure is lower than Mexican miner and number two regional gold producer Industrias Peñoles’ 403,150oz, and just over half Newmont’s 725,000oz, from mines in Peru, Suriname, Argentina, Mexico and the 40% stake in Pueblo Viejo.

For 2020, Barrick expects to produce 770,000-850,000oz gold, compared to Newmont’s revised Latin America guidance of 1.64Moz, which reflects reductions at most mines due to COVID-19 disruptions.

While Peñoles does not issue guidance, revised guidance from precious metals subsidiary Fresnillo – which accounts for the bulk of its gold production – is 785,000-815,000oz.

GROWTH PROJECTS

Barrick has a pipeline of Latin American projects which could help close the gap with US miner Newmont.

The largest – the US$8.5bn Pascua-Lama project straddling the Chile-Argentina border – could take Barrick’s Latin American output close to Newmont’s, with production forecast at 775,000oz/y gold.

But Barrick will need to re-evaluate the project after a Chilean environmental court upheld a closure order this month.

The company does not plan to appeal but said a review looking at options for the asset has started.

This could involve a previously touted option for developing the Lama deposit on the Argentine side for processing at Veladero.

Barrick also plans to advance its US$1.3bn Pueblo Viejo expansion project, but the investment would extend the life of the Dominican Republic mine rather than deliver higher production – and Newmont will continue to hold a 40% share.

Another growth option for Barrick is the US$640mn Lagunas Norte expansion in Peru.

While Barrick halted output at Lagunas Norte last year, the recent improvement in gold prices could prompt the company to consider a restart, generating around 240,000oz/y gold.

Earlier stage opportunities include the Alturas and Del Carmen projects in Chile and Argentina, respectively, which Barrick is considering advancing as a single asset.

Scoping level economics are planned for completion in Q4.

The early stage of the project means it is unlikely to advance to production in the near term.

A larger growth option for the longer term is Norte Abierto in Chile – but the asset will not help Barrick close the gap on Newmont as the companies are 50:50 JV partners.

NEWMONT OUTPUT DECLINE

A redesigned Pascua-Lama and bringing Lagunas Norte back on stream do have the potential to claw back ground from Newmont in the coming years.

And Barrick may be aided by falling output by Newmont.

The company expects South American production to fall to 1.0-1.1Moz in 2022 from 1.3Moz this year, with output in North America (which includes Peñasquito in Mexico) also set for a marginal decline.

The company’s key Latin American project is the US$2.1bn Yanacocha sulfides, but this is expected to extend operations at the Peruvian mine rather than increase it.

Newmont is also evaluating opportunities to extend the life of its Cerro Negro mine in Argentina and deliver new output from Espérance in French Guiana, close to its aging Merian mine in Suriname.

The company also has the NuevaUnión JV gold project with Teck Resources in Chile.

M&A SHORT CUT?

A much quicker way of securing the position of Latin America gold mining leader would be through M&A.

Barrick shook up the gold industry with its multi-billion dollar merger with Randgold in 2018, which was followed by a string of further deals, including the US$10bn Newmont-Goldcorp transaction.

And it appears Barrick has not lost its appetite for acquisitions.

“The industry has gone a long way from where it was in just 18 months. The problem now is that... we have not finished the job,” Bristow told the Gold Forum Americas.

The company will be at the front of the queue wherever it sees opportunities to add to its tier 1 assets – which it defines as mines producing at least 500,000oz/y gold with 10-year-plus mine lives and lower than average production costs, Bristow added.

In response to a question about Latin American M&A plans, a Barrick spokesperson told BNamericas the company did not have anything to add to the subject right now.

Deals which would move the needle for Barrick include a tie-up with fellow Canadian Yamana Gold, which expects to produce 786,000oz gold this year from mines in Chile, Brazil, Argentina and Canada.

CEO Peter Marrone would be interested in a merger if it adds value, he told The Mining Journal in July, but said the company will be patient and disciplined.

Equinox Gold, which has mines in Mexico, Brazil and the US, is another decent-sized gold producer which is eyeing further M&As after its tie-up with Leagold Mining last year.

The company is targeting 1Moz/y output in the coming years, in part through growth projects in Mexico and Brazil.

OUTLOOK

If Bristow is serious about taking Newmont’s crown as Latin America’s dominant gold producer, organic growth could provide a path forward – but a slow one with many potential obstacles, such as how to advance at Pascua-Lama, which has been in the works for over 20 years.

One or more acquisition could get the job done much faster, and willing partners are not in short supply.