By Nicole Mordant and Allison Martell
Jan 23 Barrick Gold Corp will use a
lower-than-expected gold price to estimate its bullion reserves,
its chief executive said on Thursday, making some of its
in-the-ground gold uneconomical to mine and may result in asset
The world's biggest gold producer will re-calculate its
reserves at a gold price of $1,100, down from $1,500 a year ago,
resulting in a decrease in its reserve base, CEO Jamie Sokalsky
At 140 million ounces, Barrick's reserves are the biggest in
the industry and equal to about 20 years of production for the
miner. Reserves are those parts of an ore body that are
economically feasible to extract.
"We've taken a conservative approach this year and we're
going to value our reserves at $1,100 per ounce as well as
running the mine plans at $1,100 per ounce," Sokalsky said at a
conference in Whistler, British Columbia.
Gold's price rise in 12 of the past 13 years made
lower-grade ore profitable to extract, allowing miners to expand
their reserves. But a 28 percent decline in the price of gold in
2013 to just above $1,200 at year-end means that mining some of
those reserves would no longer pay off. Analysts had expected
most miners to use a gold price of $1,200 to re-calculate their
Sokalsky did not say by how much Barrick's reserves would
fall but the company has previously said that using a gold price
of $1,200 would cause its reserves to drop by less than 10
Miners usually re-calculate their reserves once a year in
the first quarter and release the updates with their
fourth-quarter and year-end results. Barrick is due to release
its results on February 13.
If reserves fall substantially at a mine or project, it
could result in an impairment of the value of the asset.
Sokalsky also said the company expected to record a further
impairment charge at its massive Pascua-Lama project in South
America in the fourth quarter, and was also looking at making
writedowns on other assets.
Barrick said last October that it would stop development of
Pascua-Lama indefinitely, a surprise reversal on a project that
had already cost it more than $5 billion.
"As a result of the temporary suspension at Pascua-Lama, we
expect to record an additional impairment charge there at the
end of the year," Sokalsky said, referring to end-2013. He did
not give a figure for the size of the charge.
The project, on the border of Chile and Argentina, had been
plagued by political opposition, permit issues, labor unrest,
cost overruns and a sharp decline in the price of gold.
Barrick's stock rose nearly 3 percent to C$21.43 on the
Toronto Stock Exchange on Thursday, rising in line with other
gold miners as the gold price posted its biggest gain in three
Sokalsky also said Barrick had met its 2013 gold production
forecast of 7.0 million to 7.4 million ounces as well its
outlook for all-in sustaining costs of between $900 and $975 per
ounce of gold.