Ted Butler: Miners must stop subsidizing the low price of silver

Section:

Barrick Gold Aims To Lift Output Faster Than Competition

By Nicholas Sinclair
Dow Jones Newswires
Tuesday, July 27, 2004

http://sg.biz.yahoo.com/040727/15/3lzje.html

KALGOORLIE, Australia -- Canada's Barrick Gold Corp. intends
to increase production at a compound rate of 12 percent per
annum through 2007, thereby vastly exceeding the
competition's growth plans, the company said Tuesday.

This would see Barrick, currently the world's third largest
producer, lift its annual output from a projected 5 million
troy ounces in 2004 to close to 7 million ounces in 2007, David
Tucker, general manager of business development and public
affairs for Barrick Australia, told delegates at the annual
Diggers and Dealers mining forum.

Toronto-based Barrick, which produced 5.5 million ounces of
gold last year, is scheduled to release its second quarter
production and financial results later Tuesday.

The company's growth profile is to be underpinned by four
new open pit mines that are all currently under construction,
Tucker said.

The largest and most cost-efficient of these is the Alto
Chicama mine in Peru, where Barrick expects to produce
an average of about 550,000 ounces over the life of the
operation at a cash cost of US$135-US$145/oz.

The Veladero project in Argentina ranks just behind Alto
Chicama, with the company expecting to produce 540,000
ounces a year at US$155-US$165/oz.

Both of these mines are slated to begin producing gold in
the fourth quarter of next year, Tucker said.

Barrick's output boost will be supplemented by the 225,000-
ounces-per-annum Cowal mine in Australia's New South
Wales state and the 75,000 oz/year Tulawaka operation
in Tanzania.

"Those new projects will all have relatively low cash costs,
and that should keep our cash costs overall, for the whole
portfolio, (at) something less than US$200/oz," Tucker said,
adding that this would ensure Barrick remained the
lowest-cost producer of the world's major gold companies.

Compared with Barrick's 12 percent compound annual
growth rate (CAGR) over the next four years, the other four
members of the world's five largest gold producers will deliver
an average CAGR of about 2 percent, Tucker said.

Not included in Barrick's current projections is the
Pascua-Lama gold and silver mine in Chile, which is slated
to commence production by 2008, Tucker said. Barrick will
provide an update on Pascua-Lama in its second quarter
report.

While it waits for the new mines to come on stream, Barrick
expects continued strong production from the Super Pit mine
in Kalgoorlie, which it co-owns with Newmont Mining Corp.

The Super Pit is the largest active gold mine in Australia,
with 2004 output forecast between 760,000 and 800,000
ounces at an average cash cost of US$230-US$240, Tucker
said.

"It had a great year last year, it's going very well this year,
and ... as far as we can see, in the (coming) years, it looks
good," he said of the mine, which sits on the outskirts of
Kalgoorlie.

While the Super Pit's current mine life projection extends
for another 14 years, Newmont executive Hans Umlauff
said earlier Tuesday "that need not be the end of it."

Barrick, once a strong proponent of gold hedging, is now
committed to cutting the size of its hedge book "at a
sensible pace," Tucker said.

This follows an about-face late last year, when Barrick
decided it would no longer add any new hedge positions
and would instead look to gradually eliminate its hedge
book.

While fellow top-five gold producers like Newmont and Gold
Fields have been notably anti-hedging in recent years,
Barrick previously defended the merits of its hedge book,
which used to cover a significant portion of its reserve base.

"We believe in the gold price in the future, and whilst the
hedging was very good in the past, the focus is on
shareholder value, and (to that end) longer term, going
forward we believe we should be reducing the hedge
book," Tucker said.

"The target this year is to reduce the hedge book by at
least 1.5 million ounces," Tucker said. "That will be
comfortably achieved."

That would bring the total size of Barrick's hedge book at
the end of 2004 down to approximately 13 million ounces,
he said.

As of the end of the first quarter, Barrick had 70 million
ounces of unhedged reserves.

* * *

Newmont President Sees Gold
At US$380-$450 Over 18 Months

From Dow Jones Newswires
Tuesday, July 27, 2004

http://sg.biz.yahoo.com/040727/15/3lzde.html

KALGOORLIE, Australia -- Such is the interest in the gold price
forecasts of Pierre Lassonde that even as a no-show, delegates
at the Diggers and Dealers mining forum were keen for a
prediction from Newmont Mining Corp.'s president.

Thus, Hans Umlauff, group executive for operations and support
at Newmont, responded to the first question put to him following
his presentation by saying Lassonde expects gold to range
between US$380 and US$450 a troy ounce over the next 12 to
18 months.

Lassonde, who was unable to attend this year due to board
commitments, has made a splash at each of the past two annual
Diggers and Dealers events with bold price projections.

Two years ago, with gold languishing around US$300/oz,
Lassonde told his Kalgoorlie audience that the yellow metal
would rise to US$350 within 18 to 24 months.

Emboldened by what turned out to be a conservative projection,
the former head of Canada's Franco-Nevada returned returned
last year and said gold would climb "up to US$450/oz" within
12 months.

In both instances he cited the weakening of the U.S. dollar
as a key factor behind his forecasts.

Gold, which has indeed tightly tracked the euro-U.S. dollar
exchange rate in recent years, peaked at just over US$430/oz
earlier this year but has since retreated.

At 0550 GMT, spot gold was trading at US$391/oz.

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