Goldstrike mine in gold-rich Nevada
Barrick’s Goldstrike property is located in Elko and Eureka counties in north central Nevada, the richest gold-producing area in North America. Many of Barrick Gold’s (ABX) peers, including Goldcorp Inc. (GG), Newmont Mining Corp (NEM), and Kinross Gold Corporation (KGC), also have significant operations there. Barrick Gold has agreements in place with Newmont Mining to access the property.
Investors can also access gold through gold-backed exchange-traded funds (or ETFs) such as Standard and Poors depositary receipt (or SPDR) Gold Shares (GLD) and ETFs investing in gold stocks, such as VanEck Vectors Gold Miners Index (GDX).
The Goldstrike mine contributes between 13% and 15% of Barrick Gold’s (ABX) total gold production at a cost less than the company’s overall costs per unit.
Production up on higher grades
Goldstrike produced 239,000 ounces of gold at all-in cash cost (or AISC) of $921 per ounce. Production for 3Q14 was up 3% year-over-year, mainly due to higher grades from open-pit mines along with improved recoveries. AISC was better than expected due to lower processing costs, mainly as a result of processing less acidic ore and lower sustaining capital.
Capital expenditures (or capex) were up 48% year-over-year for 3Q14, mainly due to construction activity at the thiosulfate technology project and an increase in capitalized stripping costs. Goldstrike will use thiosulfate rather than cyanide to leach the gold, thus providing a nontoxic alternative.
Thiosulfate project on track
Modifications to the Goldstrike facilities are almost completed for the thiosulfate project, which will enable Goldstrike to accelerate cash flow from about 4.0 million stockpiled ounces through the addition of a patented thiosulfate process. This is expected to contribute an average of 350,000 to 450,000 ounces of annual production at similar AISC to the overall operation in the first full five years. First production is on track for the fourth quarter of 2014 at a total capital cost of approximately $620 million.
AISC guidance lowered
Guidance for Goldstrike is quite positive, with production expectation of 865,000 to 915,000 ounces. AISC guidance has been reduced to $870 to $900 per ounce, from $920 to $950 per ounce, as a result of lower lime consumption at the roaster and a decrease in sustaining capex. In 2015, production is expected to exceed 1.0 million ounces with contributions from the thiosulfate process.