September 10, 2008 / 6:21 PM / 10 years ago

Barrick to tackle costs with oil assets, new mines

TORONTO, Sept 10 (Reuters) - Barrick Gold Corp (ABX.TO) hopes to hedge nearly one-third of its energy costs through acquisitions of oil and gas assets, and also expects to control costs through opening new low-cost mines, a company official said on Wednesday.

Barrick, the world’s largest gold producer, recently acquired Cadence Energy, and will soon close an offer for certain assets of Daylight Resources DAY_u.TO, which should provide the company with about 4,500 barrels of oil equivalent a day.

“We anticipate about 30 percent of our annual direct fuel consumption will be economically hedged,” Alex Davidson, executive vice president for exploration and corporate development, said in a presentation at the Denver Gold Forum.

The move comes as soaring oil prices — along with rising costs for labor and equipment — have driven up extraction costs for mining companies.

Despite the cost inflation, Barrick’s margins have continued to expand, Davidson said.

And while gold prices have fallen about 22 percent in the last two months, he said the company is bullish on the metal.

Key to controlling costs down the road will be the opening of new mines such as Buzwagi in Tanzania, Cortez Hills in Nevada, and Pueblo Viejo in the Dominican Republic, over the next few years, he said.

Asked how Barrick planned to provide power for Pueblo Viejo — which Barrick hopes to expand through additional exploration — Davidson said the company recently purchased a heavy fuel oil power generation plant and is close to buying another one. (Reporting by Cameron French; Editing by Marguerita Choy)

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