Barrick's (ABX) CEO Jamie Sokalsky on Q2 2014 Results - Earnings Call Transcript

Jul.31.14 | About: Barrick Gold (ABX)

Barrick Gold Corporation (NYSE:ABX)

Q2 2014 Results Earnings Conference Call

July 31, 2014 9:30 AM ET

Executives

Amy Schwalm, Vice President, Investor Relations

Jamie Sokalsky - President and CEO

Kelvin Dushnisky - Co-President

Jim Gowans - Co-President

Ammar Al-Joundi - Senior Executive Vice President and CFO

Darian Rich - Executive Vice President, Talent Management

Ivan Mullany - Senior Vice President, Capital Projects

Analysts

Andrew Quail - Goldman Sachs

Stephen Walker - RBC Capital Markets

Jorge Beristain - Deutsche Bank

John Bridges - J.P. Morgan

Kerry Smith - Haywood Securities

David Haughton - BMO

Ron Stewart - Macquarie

Operator

All participants, please standby, your conference is ready to begin. Ladies and gentlemen, thank you for standing by. Welcome to the Barrick Gold Q2 Results Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (Operator Instructions)

As a reminder, this conference is being recorded on July 31, 2014. I’ll now turn the conference over to Amy Schwalm, Vice President, Investor Relations. Please go ahead.

Amy Schwalm

Thank you, Operator, and good morning, everyone. Before we begin, I would like to point out that we will be making forward-looking statements during the course of this presentation.

For a complete discussion of the risks, uncertainties and factors which may lead to our actual financial results and performance being different from the estimates contained in our forward-looking statements, please refer to our latest year-end report or our most recent AIF filing.

With that, I will hand the call over to Jamie.

Jamie Sokalsky

Thanks, Amy. Good morning. And thank you to everyone for joining us on the call. I’m here today with Kelvin Dushnisky; and Jim Gowans, both recently promoted to Co-President. As we announced a few weeks ago, Kelvin and Jim will be jointly responsible for the execution of Barrick’s operating plans and strategic initiatives. They will be working closely with Ammar Al-Joundi and Darian Rich, who are also here with me this morning.

Ammar, our Chief Financial Officer, was promoted to Senior Executive Vice President and will be working closely with our Chairman, John Thornton, on strategic priorities and Darian is now filling a newly created position, Executive Vice President, Talent Management. In addition to these changes, yesterday we announced that two new Independent Directors have been appointed to the Board.

Turning to the highlights of the quarter, we reported adjusted net earnings of $0.14 per share and a net loss of $0.23 per share. The net loss includes an impairment of $514 million for Jabal Sayid, which included $316 million attributable to goodwill.

Two weeks ago, we announced a joint venture agreement with a Saudi Arabian Mining Company, Ma'aden to operate Jabal Sayid, which will enable this project to move forward. In the quarter, we generated operating cash flow and adjusted operating cash flow of $488 million.

We’re maintaining our 2014 production guidance of between 6 million and 6.5 million ounces, but for the second year in a row we have reduced our mid-year guidance for all-in sustaining cost, which remain the lowest of our peers, as well as adjusted operating costs and CapEx.

Our copper guidance is unchanged and I’m happy to report that operations have returned to normal at Lumwana, ahead of our expectations. I’ll speak more about that later.

Our all-in sustaining costs of $865 per ounce in the second quarter and $849 per ounce for the first half were 5% and 8% lower than in the same periods last year, respectively. The second quarter cost performance is especially notable in light of the expected lower production of 1.5 million ounces.

In addition to the reduced capital spending, it reflects a number of cost initiatives that are being carried out as part of the $500 million annual savings target we announced earlier this year and which we expect to reach as a run rate by the end of the year.

The savings from our initiative to reduce external spending, which represents about half of the total are being derived from three main areas. The first, commercial savings are about 40% are from new contracts in place with improved pricing for items like heavy equipment and maintenance supplies.

Secondly, demand management are about 30%, where we eliminated some contractors and are in-sourcing some on-site work, as well as using lower cost suppliers. We’ve also launched a global review of all services contracts.

And lastly, process improvements are about 30%, such as reductions to working capital. We’ve also launched global programs to reduce inventory and improve maintenance planning.

We’re pleased that we’ve been able to reduce cost guidance again, reflecting our unwavering focus on operational excellence, cost reduction and disciplined capital allocation.

We’ve reduced our outlook and narrowed the range for all-in sustaining costs to $900 to $940 per ounce, which is down from the previous guidance of $920 to $980 per ounce, based on the lower expected adjusted operating costs and additional reductions in capital spending in the first half of the year. Our adjusted operating costs have been further reduced to $580 to $630 per ounce.

Our total CapEx guidance has been lowered by $200 million to $2.2 billion to $2.5 billion, compared to the original range of $2.4 billion to $2.7 billion. Our first half capital expenditures of $1 billion were down from the $2.8 billion in the same period last year or nearly 65% due to our initiatives to reduce sustaining capital and from lower project capital expenditures.

These cost reductions are a testament to the commitment of our GMs and the operational efficiencies, and improvements they have been implementing, as I’ve just spoken about.

Our five cornerstone mines produced about 900,000 ounces or 60% of total production at average all-in sustaining costs of $730 per ounce. That’s almost $600 below the current gold price. We continue to expect them to contribute about 60% of expected 2014 production at all-in sustaining costs of between $750 and $800 per ounce.

We also had good operating performance from our Australia-Pacific operations with some notable performances from KCGM on higher grades and recoveries, and from Cowal on higher through put. And African Barrick Gold continued to report strong results, which included the initial production from the Bulyanhulu, CIL expansion project.

At Cortez, production of 217,000 ounces at all-in sustaining costs of $754 per ounce was impacted by lower than anticipated grades due to negative grade reconciliations in the smaller pit where mining was focused.

We will be finished mining in this area by the end of this year and we expect to partially recover the shortfall we experienced in the second quarter and the second half of the year, with some production from the Cortez Hills open pit.

The Goldstrike operation turned in a strong performance with production of 214,000 ounces at all-in sustaining costs of $886 per ounce. Production was better than expected on higher grades and recoveries from the open pit and all-in sustaining costs also benefited from lower capital stripping costs related to the ongoing optimization of the mine plan.

Our patented thiosulfate project remains on track and on budget to start up in the fourth quarter, and will accelerate 4 million ounces through the autoclaves that otherwise would have become idle. With the contribution from the modified a autoclaves, we anticipate production in 2015 to increase to over 1 million ounces at Goldstrike.

The Pueblo Viejo mine contributed 161,000 ounces at all-in sustaining costs of $587 an ounce in the second quarter. The autoclaves have achieved targeted and sustainable run rates. Modifications to the lime circuit are essentially complete and the mine is progressing toward design capacities on silver and copper.

At Lagunas Norte, production of 115,000 ounces at all-in sustaining costs of $593 per ounce in the second quarter was impacted by a construction delay on the new Phase 5 area of the leach pad.

This requires the ore to be stacked on an older and higher area of the pad resulting in a longer recovery cycle. Higher grades are anticipated in the second half of the year, as well as faster recoveries from the new leach pad phase, which is expected to be in operation in the third quarter.

Veladero mine had a strong quarter producing 189,000 ounces at all-in sustaining costs of $740 per ounce. The costs there benefited from higher silver credits in the first half of the year and all-in sustaining costs are expected to be slightly higher in the second half, primarily due to the timing of sustaining capital expenditures and also from lower silver credits as mining will be sourced mainly from a different pit.

Our copper operations produced 67 million pounds in the second quarter at C1 cash costs of $2.04 per pound.

As mentioned, I’m pleased to report processing resumed at Lumwana three weeks ago, well ahead of our expectations. The reconstruction time lines was shortened due to the excellent work of our project team at site and the fact that the foundations in the area where the conveyor collapsed were undamaged, which meant the repairs were limited to rebuilding a portion of the above ground structure.

The mine produced 12 million pounds at C1 cash costs of $2.49 per pound before processing was suspended in April. We expect to access better grade ore in the second half of the year at Lumwana due to higher stripping activities in the first half.

The Zaldivar mine produced 55 million pounds in the second quarter at C1 cash costs of $1.83 per pound. We’re maintaining our overall 2014 copper production guidance of 410 million pounds to 440 million pounds and our C1 cash costs guidance of $1.90 to $2.10 per pound.

As I mentioned at the start of the call, we recently announced a joint venture agreement with Ma'aden in which it will acquire 50% of the Jabal Sayid copper project for $210 million in cash.

This agreement will allow the project to move forward with the benefit of Ma'aden extensive experience in the Saudi Arabian mining sector, combined with Barrick’s technical and operating experience.

We anticipate production will commence in late 2015, after completion of underground development work and HCIS-related security infrastructure, and the remobilization of the workforce and this agreement is expected to close in the fourth quarter of this year.

Jabal Sayid is forecast to produce 100 million pounds to 130 million pounds of copper concentrate a year at first quartile C1 cash costs during the first five full years of operation. And once in production, the mine has up to a 15-year life based on current reserves of 1.4 billion pounds. There is good underground exploration potential around the current reserves and in the surrounding areas of the mining and exploration license.

As we spoke about last quarter, we have a deep project pipeline with excellent potential to exceed our risk adjusted return hurdles. The options shown here on this slide range from mine expansions to third-party opportunities, each of these projects have to compete for capital along with our greenfield prospects such as Gold Ridge and Spring Valley.

Our emphasis is on prolific belts in North and South America, and we remained heavily focused on Nevada where we have significant optionality and a proven track record of development. We’re advancing a number of projects through the prefeasibility stage as you see here.

One addition to the pipeline from last quarter is the 60% owned South Arturo joint venture project about eight kilometers away from Goldstrike, which now has an approved EIS. This is another example of near mine exploration success in Nevada in an established camp, which has produced nearly 41 million ounces to-date.

We expect to begin developing the high grade portion of the deposit in late 2015 for modest capital less than $35 million on 100% basis and mining costs that are lower than Goldstrike.

Development of South Arturo is consistent with our strategy of focusing on the highest value ounces with the best risk adjusted returns. The bulk of the ore will be processed through Goldstrike’s refractory plants to yield approximately 440,000 ounces on 100% basis in 2016 and 2017.

Our exploration budget continues to be weighted to near mine areas where we have had excellent success in the past at finding new deposits. I was at Goldrush in Nevada during the second quarter with a few others from our senior management team, as well as the exploration and project teams, and I came away with a renewed sense of excitement about this project.

Goldstrike is one of the -- Goldrush is one of the highest grade greenfield discoveries in the past decade. It’s also the only 10 million ounce plus discovery by a major producer in the past five years and it’s located just six kilometers from our Cortez mine in the heart of the Cortez camp. This is an area which has significant existing infrastructure and which has produced some 18 million ounces to-date.

We’ve doubled the size of the total resource at Goldrush twice since we announced it three years ago and it currently stands at nearly 16 million ounces and we haven’t yet found the edges of the deposit.

During the quarter, we submitted a permit application for an exploration decline from the North. The proposed decline would provide a platform to enable us to test for additional mineralization beyond the Northern extent of the deposit and drilling to-date has continued to improve our confidence in the continuity of the existing resource, but the decline would also help to better define it. We expect to have a prefeasibility study on Goldrush completed in the middle of next year.

I was also just in Santiago a few weeks ago and can report the ramp-down of Pascua-Lama has been completed on budget and schedule. We still expect to spend about $300 million this year related to the ramp-down, care and maintenance activities and social and environmental obligations, just still in line with our original guidance for the year.

As we have stated, we won’t make a decision to resume construction until we have clarity in a number of areas, including improved economics, the metal price outlook and less uncertainty on legal and other regulatory requirements. We’ll resume using the phased approach we are now taking with all projects and that will allow for better planning, execution and capital deployment as well as improved cost control.

This will give us more leverage and flexibility in contracting with suppliers, contractors and governments. It is critical to maintain this flexibility in order to help mitigate the impact of cost escalation and commodity price risk. We continue to evaluate opportunities to improve the risk adjusted return such as strategic partnerships and royalty or streaming deals.

And during the second quarter, we signed a memorandum of understanding with a group of 15 Diaguita indigenous communities and associations in Chile’s Huasco province. The MoU marks a first step in establishing dialogue and working to build trust with members of this important stakeholder group.

As part of the memorandum of understanding, we will make technical and environmental information about the Pascua-Lama project available to the communities and will provide financial resources and materials required to support analysis of this information.

Turning to our balance sheet. While Barrick is in a much stronger position than it was last year, we continue to be focused on reducing debt levels further to increase our flexibility and also our ability to be opportunistic.

We continue to have a modest debt maturity schedule next several years with only $300 million of debt due by the end of 2015, which is well below the $488 million of operating cash flow we generated in the second quarter alone. The end of the second quarter, we had $2.5 billion of cash and equivalents and $4 billion available under our undrawn credit facility.

A few closing comments. As you know, in recent years, Barrick has had some challenges and uncertainties that were made even more challenging as the gold price plummeted, the largest drop in three decades. We faced this head-on by focusing on returns over production within our disciplined capital allocation framework, a concept that continues to be at the core of every decision. Some of which have been very difficult.

This framework also included making significant strides in reducing costs and cutting, suspending, or deferring lower return capital investments as well as also optimizing our portfolio. The proof of this is that we have lowered our cost and CapEx guidance during the year for the second year in a row. But there still is more that can be done as we continue to prioritize operational excellence.

Portfolio optimization will continue to be an ongoing dynamic process as we concentrate on the assets that have the best ability to generate free cash flow over the long term. More than $1.3 billion of non-core assets have been divested over the past year alone, none of which were expected to contribute any meaningful free cash flow at current prices in the foreseeable future. These efforts have lowered our cost profile and while it has meant lower production, they’ve strengthened our industry-leading portfolio overall which includes our five cornerstone gold operations.

Our deep pipeline of high quality projects, particularly in Nevada, also gives us some tremendous options for future growth in areas we know very well and where we’ve had a lot of historic success in developing mines. As a result, Barrick is stronger, leaner, more financially flexible and more agile and now better positioned against price downside and more strongly positioned for the upside.

To wrap up, I would like to say that having been with Barrick since 1993, I feel a deep connection to the company and to all of our great employees, the best in the industry in my view. I have been extremely fortunate to have worked with some amazing people at Barrick over two decades, many of whom are still here and many of whom have gone onto other successes elsewhere.

I’m genuinely proud of Barrick’s people for persevering and focusing on the job at hand during some difficult times over the past couple of years. I want to emphasize that none of what has been accomplished would have been possible without the outstanding efforts and dedication of our employees around the world who stepped up to the challenge and delivered results and to all of them, a huge thank you. We couldn’t have done it without you. I also want to thank our investors, the analysts, other members of the investment community and key stakeholders who have continued to support us.

It has been an honor and a privilege to have been here at Barrick for so many years. And I am grateful to have had the opportunity to play a role in repositioning and strengthening the company over that time. I’m confident that Barrick is in very good hands for the next phase of its successful evolution. And I look forward to its future with a great deal of optimism.

I’ll now open it up to questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) The first question is from Andrew Quail of Goldman Sachs. Please go ahead.

Andrew Quail - Goldman Sachs

Good morning, Jamie and Jim. Firstly, Jamie, congratulations on a long and very distinguished career at Barrick.

Jamie Sokalsky

Thank you.

Andrew Quail - Goldman Sachs

Couple questions. Cortez obviously lower than expected grade when you -- it was going to come off this year, do we still see that rebounding in third quarter and beyond?

Jim Gowans

Good morning, it’s Jim Gowans speaking. And I guess the short answer to your question is yes. We did have some challenges on one portion of our ore body in terms of grade reconciliation. But we have some mitigations in place now and we should be able to bring that back up to the lower part of the guidance for the year.

Andrew Quail - Goldman Sachs

Great, okay. So, that will be driven by grade. On Jabal Sayid, obviously, a positive announcement there, you also mentioned the timeline obviously. But what is exactly the expected CapEx to finish it off?

Jamie Sokalsky

Andrew, there’s not a significant amount of capital to finish it off. We’ve spent the bulk of the capital and we’ve got about $75 million or $100 million-ish to go, just to complete some of the [HEIS] (ph) and some of the commissioning, et cetera. So it’s not a material amount.

Andrew Quail - Goldman Sachs

That’s what I thought. And just one more maybe an accounting question on Pascua. Is -- are we going to expect most of that to be expense through the P&L or is there some of that that will be capitalized going forward?

I know it was mentioned, but just I think your other expenses jumped up on that. Is that something we can sort of put throughout our models going forward in the P&L, in the other expenses?

Ammar Al-Joundi

Hi, Andrew, it’s Ammar. It’s going to be mostly expense. Its care and maintenance largely at this point. To the extent that there are any specific capital items that would be treated differently, but you can effectively think of it mostly as expense.

Andrew Quail - Goldman Sachs

All right. Thanks very much, guys.

Jamie Sokalsky

Thanks, Andrew.

Operator

Thank you. The following question is from Stephen Walker of RBC Capital Markets. Please go ahead.

Stephen Walker - RBC Capital Markets

Thank you. And again, Jamie, congratulations on your positive contributions to Barrick over the years.

Jamie Sokalsky

Thank you, Stephen.

Stephen Walker - RBC Capital Markets

I want to talk strategically about obviously the success in Nevada but some of the challenges, I guess the challenges in planning going forward. When I look at the refractory ore from North Arturo, obviously Turquoise Ridge, potential for expansion there and then Goldrush which I believe a component of that is double refractory, i.e. carbonaceous rich. Can you talk a little bit about sort of what is the longer term requirement, i.e., in the next five years for the metallurgical facilities. Goldstrike obviously is the core and those autoclaves are being converted to biosulfate.

But you’re going to need sort of additional capacity in the western part of the state with Turquoise Ridge and Goldrush, I would assume. Are there plans for another permitting and building another roaster/autoclave complex to handle what could be more material from the new discoveries or is there existing capacity at Goldstrike? Could you talk a little bit about…

Jim Gowans

Good morning, it’s Jim Gowans here. You’re right. We’re in the process of planning that. It’s still in early stages. That’s one of the items that’s on the prefeasibility for Goldrush because it’s predominantly a refractory ore is to take a look at all our processing requirements across the northern half of the state and then see how we balance the needs against capacity. So -- but that’s one of the things we’re looking at for sure.

Stephen Walker - RBC Capital Markets

If you had to permit a new metallurgical plant somewhere in the greenfields, what sort of timing would that take? Have you had any sort of estimates or what -- as far as engineering/permitting/construction timeline would be like?

Kelvin Dushnisky

Yes, Stephen, it’s Kelvin here. It’s pretty early. It would depend on specifically what we are trying to permit. But pretty good guess would be three to four years from the time of having engineering available.

Stephen Walker - RBC Capital Markets

Okay, thanks for that. Maybe just switching gears a little bit, At Pueblo Viejo, the targeted -- you’re not quite achieving the recoveries for silver and copper and it’s having an impact obviously on cost as well as the taxes paid at that operation, maybe two-fold question. When do you anticipate achieving the silver and copper recoveries? And then secondly, Ammar, what is the potential impact if any on sort of the percentage taxes that are being paid currently and your outlook into 2015?

Jim Gowans

Stephen, its Jim Gowans. I’ll answer the first part of the question. In terms of the gold and silver, our copper circuits were expected to be at capacity in Q4. That’s a lower priority for us. The silver circuits are actually coming along quite well. We’re currently sitting around 83 which is slightly over the feasibility study in terms of recoveries. But of course that’s been -- we’ve only been achieving that with any kind of consistency in the last couple months. But I anticipate that we should be able to hold those levels because of changes we made in the circuit in terms of heat recovery. The other part of the question?

Ammar Al-Joundi

Sure. Stephen, with respect to the tax, as I think most of you know, the tax structure associated with Pueblo Viejo incorporates a minimum tax that effectively puts the burden of operational performance to plan on Barrick. As Jim said, the primary gold circuit is working quite well. The silver circuit is going to be working well. And that’s the majority of the economics. The copper’s a pretty small part. So right now we don’t expect any material changes from the forecasted tax rates that we’ve presented.

Stephen Walker - RBC Capital Markets

Great, thank you very much for that.

Jamie Sokalsky

Thank you, Stephen.

Operator

Thank you. The following question is from Jorge Beristain of Deutsche Bank. Please go ahead.

Jorge Beristain - Deutsche Bank

Good morning, Jamie and again, congratulations on your tenure at Barrick and your…

Jamie Sokalsky

Thanks, Jorge.

Jorge Beristain - Deutsche Bank

….and your great performance over the time. I just wanted to ask more of a strategic question. These recent changes with the creation of the kind of splits CEO role on a go-forward basis. I was wondering, was that part of the corporate governance changes that Barrick had implemented earlier this year and had been talked about for the past year or was this something that was a fairly new decision after the corporate governance improvements?

Jamie Sokalsky

Jorge, this is something that has evolved just more recently and is just part of how the evolution of we want to manage the company. So it’s a process that we’ve gone through as part of how we’re looking to focus more on operational excellence.

Jorge Beristain - Deutsche Bank

And were those changes, the decision to split the role, was that basically done on the former Board because I know, see you’re transitioning a few new Board members currently. So I’m just trying to understand, was that a decision put through by the former Board or was it partly put through by some of the new Board members that had recently been named?

Kelvin Dushnisky

Kelvin speaking, Jorge. I think the answer of that would be more of the new Board, reflecting the ongoing changes.

Jorge Beristain - Deutsche Bank

Okay. Well, we have a dual CEO structure here at DB, so anyway, just trying to understand what was driving that and the timing. Thank you.

Jamie Sokalsky

Okay. You’re welcome.

Operator

Thank you. The following question is from John Bridges of J.P. Morgan. Please go ahead.

John Bridges - J.P. Morgan

Good morning, Jamie, everybody. Again, best of luck in your new endeavors and congratulations on what you’ve achieved.

Jamie Sokalsky

Thank you, John.

John Bridges - J.P. Morgan

Just wondered, following on from Steve’s question, I know a former CEO had a South African solution to the metallurgical program of regulating it -- regulating material up to the existing facilities. What would you say the probability would be of building a new facility? It seems as if the new era in gold is to make deal with what you’ve got rather than build fresh, new stuff.

Jim Gowans

It’s Jim Gowans here. That’s all part of the studies and we’re pretty much in very early stages of that. And we have to match all our capacities for autoclaving or roasting or our TCM. And I think that it’s a bit too early, yet.

John Bridges - J.P. Morgan

And the rail option, I was exposed to that many years ago. Is that off the table or is that still one of the options?

Jim Gowans

No, it was one of the -- it’s one of the things that we’re looking at in terms of transportation.

John Bridges - J.P. Morgan

Okay. And then just still in Nevada at Cortez, you talk about not having permits for the lower part of Cortez. Is that below the water table? Or what was the issue with that?

Jim Gowans

It’s below their current water pumping levels and it’s more of a geological or geographical cutoff. So we’re just -- we’re in the process of doing -- we extend our declines down into that area.

John Bridges - J.P. Morgan

Okay. I’m just a bit surprised, but you wouldn’t have preemptively got that permitted, because the deeper portion of Cortez has always been sort of in the longer-term planning?

Jim Gowans

It’s an ongoing process. The balancing off are permits against the production profiles over the years.

John Bridges - J.P. Morgan

Okay. Thanks, again. And best of luck everybody.

Jamie Sokalsky

Thanks, John.

Operator

Thank you. Following question is from Kerry Smith of Haywood Securities. Please go ahead.

Kerry Smith - Haywood Securities

Thanks, Operator. Kelvin, how long do you think it would actually take to permit the portal at Goldrush?

Kelvin Dushnisky

I think Kerry, we’re targeting the end of next year.

Kerry Smith - Haywood Securities

And when did you make..

Kelvin Dushnisky

End of 2015.

Kerry Smith - Haywood Securities

End of 2015. And when did you make the application?

Kelvin Dushnisky

It’s already underway.

Kerry Smith - Haywood Securities

So went in like this quarter, basically?

Kelvin Dushnisky

July, yeah.

Kerry Smith - Haywood Securities

July, okay. So end of 2015. And then do you expect that the exploration effort might slow down a bit until you get the portal in so you can drill from underground or will you kind of continue on with the same level of exploration from surface that you’ve had?

Kelvin Dushnisky

Well, maybe, Jim can comment more, but the infill drilling is continuing. So we don’t see any slowdown, Kerry, at this point.

Jim Gowans

Yes. That’s the same.

Kerry Smith - Haywood Securities

Okay. So it’s full speed ahead then. Okay, that’s good. Thank you.

Jim Gowans

Thanks, Kerry.

Operator

(Operator Instructions) Following question is from David Haughton of BMO. Please go ahead.

David Haughton - BMO

Yes. Good morning. And, Jamie, adding to the weight of analyst support there, congratulations for a distinguished career.

Jamie Sokalsky

Thanks, David.

David Haughton - BMO

Just thinking about Pascua, I know that you’ve got the $300 million for the costs this year. What would your expectation be for care and maintenance going forward at that operation or at that mine?

Ammar Al-Joundi

Hey, David, it’s Ammar here. The care and maintenance right now is about $15 million a month. We’re working obviously to bring that number down, but that’s where it is right now.

David Haughton - BMO

Thank you, Ammar, and congratulations in your new role.

Ammar Al-Joundi

Thank you.

David Haughton - BMO

What would be the next steps that you’re looking at to move this forward from a government and community relation? I understand that you’ve got the MoU. It is a surprise that you’ve got it now instead of some time ago. But what other avenues are you moving forward on, just to get an idea of that social side of things?

Kelvin Dushnisky

It’s Kelvin. On the social side, first all, the MoU, we think, is very positive and that it’s the first one of it’s kind in Chile, in fact. And it’s an agreement to dialogue and move the project forward. So we’re very encouraged by it. We’re doing a lot of work as well in the communities alongside the project. While we’re in this suspension stage, it’s important that we keep our relationships positive in the local area.

As far as the next steps, we have the conceptual design completed now for the water management system, which as you know is kind of the rate-limiting step. And we’ve had initial discussions with government, and those discussions are going to continue through the summer. So we expect that before the end of the year we’ll be in a position to have a very good understanding of what the permitting timeline would be.

David Haughton - BMO

Thank you, Kelvin. Congratulations to you too and to Jim and your co-roles there.

Kelvin Dushnisky

Thank you.

David Haughton - BMO

Just on the water management, that is a critical piece to be able to move the permitting forward. Do you have an expectation, once it’s approved, what kind of capital outlay would be required to get it up to the standards that the government has an expectation of?

Kelvin Dushnisky

Look the estimate we’re using at this point, I think, hasn’t changed from before. And Ivan Mullany is here to correct if I’m wrong, but I think the number we’re using is about $300 million for the total system.

Ivan Mullany

That’s correct.

David Haughton - BMO

And how long would you expect for that take to complete?

Kelvin Dushnisky

About a year, construction about a year.

David Haughton - BMO

And back to a question of expense versus capital, I guess, this is a legitimate capital item rather than being expensed.

Ammar Al-Joundi

Yeah. To the extent that work gets done, that would be capitalized. And that’s what I was referring to when I said earlier there is the care and maintenance. And then, once we approve specific capital items, they’d be capitalized. What I do want to point out, though, is we have mentioned this and I’ll mention it again, we are taking a very systematic staged approach to this project right now. We are only going to spend money when everything is lined up, which kind of makes sense. And we know that the overall project returns make sense. So that money has not yet specifically been approved, but we’re going to finalize the design, make sure that the government’s okay with the design, and then go ahead from there.

David Haughton - BMO

Okay. Thank you. Just shifting the other side of the world now. Looking at Jabal Sayid and the relationship that you’ve now got with the Saudi Mining Company, just thinking in the longer term, can you see further opportunities in that part of the world with this relationship?

Kelvin Dushnisky

It’s Kelvin. Look, I could tell you we had a very positive, encouraging meeting when we were at Saudi and one of the points that were raised to us is that Saudi would like to consider us a preferred partner now on a going forward basis. So I can’t speak to the geology, but I can also say that the Saudi government is also undertaking a survey, a detailed survey, almost like a USGS survey on the geology in the country.

And so they’ve encouraged us to look carefully at that and again they are considering us a preferred partner. So, that’s kind of at the higher level, in addition to the advantages now it being partnered obviously with the state owned mining company.

David Haughton - BMO

All right. I guess a (indiscernible) you could talk to the geology because that new shield area is really quite fascinating and relatively speaking under exploited?

Kelvin Dushnisky

That’s our understanding, yes.

David Haughton - BMO

All right. Thank you, everybody.

Jamie Sokalsky

Thanks, David.

Kelvin Dushnisky

Thank you.

Operator

Thank you. The following question is from Ron Stewart of Macquarie. Please go ahead.

Ron Stewart - Macquarie

Congratulations, guys. Jamie, hope all is well. Congratulations on a great career with Barrick.

Jamie Sokalsky

Thank you, Ron.

Ron Stewart - Macquarie

The question I have for you is on Goldstrike, the thiosulfate project. You’re talking about commissioning and getting it going on Q4. Can you give us a little bit more color on how that’s going and do you expect like early 2015 to be at 100% capacity with that project?

Jim Gowans

Ron, it’s Jim Gowans. It’s good to hear a familiar voice on the phone.

Ron Stewart - Macquarie

Yeah, Jim.

Jim Gowans

The answer is that the construction on that project is on schedule and on budget. It’s going quite well. We’ve actually on the part of the CIO circuit that was integrated with the rest of the process plant. We’ve already switched over and brought it back online. We will start to commission other parts of the circuit in late August, September, and the main part of the circuit is we’re looking at around towards the end of the year. Currently I don’t see any flaws yet.

Ron Stewart - Macquarie

Great. We’re looking forward to seeing how that’s going. Just on a different matter, in respect of the overall strategy for the company, there was a mention of it that there’s a strategic review ongoing right now. Do we expect to get a little bit more clarity on the overall strategy of the company going forward through the quarter or maybe the Q3 release? Do you have any comment to that?

Kelvin Dushnisky

Maybe I can comment. It’s Kelvin. The Board sets the strategy with input from management and that’s a process that’s undergoing now. I don’t want to speculate or be definitive around timing. But I think we look to have something on that before the end of the year. And as I said it’s a process that’s ongoing as we speak.

Ron Stewart - Macquarie

Okay. Congratulations, again, everyone. And thank you.

Kelvin Dushnisky

Thanks, Ron.

Operator

Thank you. The following question is from Stephen Walker of RBC Capital Markets. Please go ahead.

Stephen Walker - RBC Capital Markets

Thank you. Just a follow-up on Jabal Sayid. A couple things. First of all, the operator is at 50/50 joint venture presumably, but are you still the operator? Secondly, if you are being considered as a strategic or favored partner in Saudi Arabia, Ma'aden obviously have base metal, precious metals, assets and smelting infrastructure, is it I guess possible to see that that joint venture relationship expand? And I guess what I’m getting at is Jabal at this stage core or non-core vis-à-vis potential asset sale?

And then maybe speaking more broadly, 50/50 JV is again you have a number of joint ventures but you’ve always wanted to own 100% of your assets. Is the strategy now evolving towards owning 50% or 60% of an asset, being the manager of the project versus owning 100%?

And I guess that has previously indicated that that’s where Pascua-Lama could go. I guess two questions. I apologize for the comments, extended comment first of all. Could you elaborate on the strategy going forward that you expect in Saudi Arabia? And secondly, will that apply to some of your others assets as well where you could be bringing in strategic partners?

Kelvin Dushnisky

It’s Kelvin. I’ll respond to the first part. Maybe Ammar you can follow up. But as far as Jabal Sayid goes, it’s a 50/50 kind of classic JV. We are the operators. There will be a four person Board, two members, an Executive Committee which we’ll appoint the Chairman of. So we appointed GM and otherwise it kind of follows standard 50/50 JV procedures like you’d see anywhere in North America.

Our commitment is that for the other concessions that we presently own, exploration licenses as part of the JS process, we develop those further. They would also be on a 50/50 basis. But any other assets in the country we will have the option either if we chose to develop on our own or in partnership with Ma'aden which could make sense. I can tell you the relationship with Ma'aden is a very positive one and they’re keen on doing things with us. So, we have a lot of options there, but we’re not really restricted in any way.

Ammar Al-Joundi

Stephen, with regards to the broader strategic partners going forward, we absolutely -- we at Barrick absolutely are understanding that the market is changing and the value of bringing in strategic partners to certain projects.

If you’re serious about giving the best return to shareholders, you’ve got to structure things in the best way and I think the old ways of a mining company coming in and wanting to do everything by themselves wasn’t always the best strategy. So we’re open to that and I imagine the industry’s probably going to be more open to that going forward.

Stephen Walker - RBC Capital Markets

Thank you for that.

Operator

Thank you. There are no further questions registered at this time. I’d like to turn the meeting back over to Mr. Sokalsky.

Jamie Sokalsky

Thank you, Operator. And thank you everyone for being on the call today. As we’ve indicated in our presentation, Barrick is very well-positioned for the future and we look forward to speaking with you again. Thank you.

Operator

Thank you. The conference has now ended. Please disconnect your lines at this time. We thank you for your participation.

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