As filed with the Securities and Exchange Commission on May 30, 2008
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM F-9 and FORM F-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
| Form F-9 | Form F-3 | |
| Barrick Gold Corporation | Barrick North America Finance LLC Barrick Gold Financeco LLC | |
(Exact Name of Registrant as Specified in its Charter)
| Ontario | Delaware Delaware |
(Province or Other Jurisdiction of Incorporation or Organization)
| 1040 | Not Applicable |
(Primary Standard Industrial Classification Code Number)
| Not Applicable | 26-2663280 26-2663197 |
(I.R.S. Employee Identification No.)
| Brookfield Place, TD Canada Trust Tower Suite 3700 161 Bay Street, P.O. Box 212 Toronto, Ontario Canada M5J 2S1 (800) 720-7415 |
136 East South Temple Suite 1800 Salt Lake City Utah 84111-1134 United States (801) 990-3900 |
(Address, including postal code, and telephone number, including area code, of Registrant’s principal executive offices)
| CT Corporation System | Barrick North America Finance LLC Barrick Gold Financeco LLC | |
| 111 Eighth Avenue | 136 East South Temple Suite 1800 | |
| New York, New York 10011 | Salt Lake City Utah 84111-1134 | |
| (212) 894-8700 | (801) 990-3900 |
(Name, Address (Including Zip Code) and Telephone Number (Including Area Code) of Agent for Service in the United States)
Copies to:
| Sybil E. Veenman | Christopher J. Cummings | Kevin Thomson | ||
| Barrick Gold Corporation | Shearman & Sterling LLP | Davies Ward Phillips & Vineberg LLP | ||
| Brookfield Place, TD Canada | Commerce Court West | P.O. Box 63, 44th Floor | ||
| Trust Tower | Suite 4405, P.O. Box 247 | 1 First Canadian Place | ||
| Suite 3700 | Toronto, Ontario M5L 1E8 | Toronto, Ontario M5X 1B1 | ||
| 161 Bay Street, P.O. Box 212 | (416) 360-8484 | (416) 863-5530 | ||
| Toronto, Ontario M5J 2S1 | ||||
| (800) 720-7415 |
Approximate date of commencement of proposed sale of the securities to the public: From time to time after the effective date of this Registration Statement.
| Form F-9 | Form F-3 | |
| Province of Ontario | ||
| (Principal Jurisdiction Regulating this Form F-9 Offering)
It is proposed that this filing shall become effective (check appropriate box):
A. ¨ upon filing with the Commission, pursuant to Rule 467(a) (if in connection with an offering being made contemporaneously in the United States and Canada).
B. þ at some future date (check appropriate box below):
1. ¨ Pursuant to Rule 467(b) on ( ) at ( ) (designate a time not sooner than seven calendar days after filing).
2. ¨ Pursuant to Rule 467(b) on ( ) at ( ) (designate a time seven calendar days or sooner after filing) because the securities regulatory authority in the review jurisdiction has issued a receipt or notification of clearance on ( ).
3. ¨ Pursuant to Rule 467(b) as soon as practicable after notification of the Commission by the registrant or the Canadian securities regulatory authority of the review jurisdiction that a receipt or notification of clearance has been issued with respect hereto.
4. þ After the filing of the next amendment to this form (if preliminary material is being filed).
If any of the securities being registered on this Form F-9 are to be offered on a delayed or continuous basis pursuant to the home jurisdiction’s shelf prospectus offering procedures, check the following box. þ |
If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. ¨
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, please check the following box. þ
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a registration statement pursuant to General Instruction I.C. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box. ¨
If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.C. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. ¨ | |
CALCULATION OF REGISTRATION FEE
| Title of Each Class of Securities to be Registered |
Amount to be Registered |
Proposed Offering Price |
Proposed Offering |
Amount of Registration |
|||||||||||
| Debt Securities (2) |
$ | 2,000,000,000 | (3) | 100 | % | $ | 2,000,000,000 | (3) | $ | 78,600 | (5) | ||||
| Guarantees of Debt Securities (4) |
(4) | (4) | (4) | None | |||||||||||
| (1) | Estimated solely for the purpose of determining the registration fee. |
| (2) | Debt Securities of Barrick Gold Corporation, Barrick North America Finance LLC and Barrick Gold Financeco LLC being registered on Form F-9 and Form F-3 hereunder. |
| (3) | In U.S. dollars or the equivalent thereof in foreign denominated currencies or currency units or if any Debt Securities are issued at an original issue discount, such greater amount as shall result in an aggregate offering price of $2,000,000,000. |
| (4) | Guarantees by Barrick Gold Corporation being registered on Form F-9 hereunder are to be sold without separate consideration. |
| (5) | $126,700 was previously paid in connection with a registration statement on Form F-9 (File No. 333-120133) filed by Barrick Gold Corporation, Barrick Gold Inc. and Barrick Gold Finance Company on November 1, 2004, including $31,675 paid in relation to securities remaining unsold in the offering contemplated by such registration statement, which unsold securities are hereby deregistered. Pursuant to Rule 457(p) under the Securities Act of 1933, as amended, $31,675 is being offset against the filing fee due in connection with this registration statement. Accordingly, $46,925 is being paid at the time of filing this registration statement. |
The Registrants hereby amend this registration statement on such date or dates as may be necessary to delay its effective date until the registration statement shall becomes effective as provided in Rule 467 under the Securities Act of 1933 or on such date as the Commission, acting pursuant to Section 8(a) of the Act, may determine.
PART I
INFORMATION REQUIRED TO BE DELIVERED
TO OFFEREES OR PURCHASERS
PRELIMINARY SHORT FORM BASE SHELF PROSPECTUS
| New Issue |
May 30, 2008 |
Barrick Gold Corporation
| Barrick North America Finance LLC | Barrick Gold Financeco LLC |
US $2,000,000,000
Debt Securities
Barrick, BNAF or BGF may offer and issue from time to time their debt securities consisting of debentures, notes, bonds and/or other similar evidences of indebtedness (collectively, the “Debt Securities”) up to an aggregate principal amount of $2,000,000,000 or the equivalent thereof in one or more foreign currencies or composite currencies. Any Debt Securities issued by BNAF or BGF will be unconditionally and irrevocably guaranteed by Barrick. Debt Securities may be offered, separately or together, in separate series, in amounts, at prices and on terms to be determined at the time of sale. The issuer of the Debt Securities, the specific designation, aggregate principal amount, currency, denomination, maturity, rate (which may be fixed or variable) and time of payment of interest, if any, any terms for redemption at the option of the issuer or the holders, any terms for sinking fund payments, the initial offering price (or the manner of determination thereof if offered on a non-fixed price basis) any listing on a securities exchange and any other terms in connection with the offering and sale of any series of Debt Securities in respect of which this prospectus is being delivered will be set forth in the accompanying prospectus supplement relating thereto. The net proceeds to the applicable issuer from such sale will be set forth in a prospectus supplement.
The Debt Securities have not been approved or disapproved by the Ontario Securities Commission, the Securities and Exchange Commission or any state securities regulator, nor has the Ontario Securities Commission, the Securities and Exchange Commission or any state securities regulator, passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
We are permitted to prepare this prospectus in accordance with Canadian disclosure requirements, which are different from those of the United States.
Owning the Debt Securities may subject you to tax consequences both in the United States and Canada. You should read the tax discussion in any applicable prospectus supplement. This prospectus or any applicable prospectus supplement may not describe these tax consequences fully.
Your ability to enforce civil liabilities under United States federal securities laws may be affected adversely because Barrick is incorporated under the laws of the Province of Ontario, Canada, some of the officers and directors of Barrick, BNAF and BGF, and some of the experts named in this prospectus are Canadian residents, and a majority of Barrick’s assets and the assets of those officers, directors and experts are located outside of the United States.
BNAF and BGF are incorporated under the laws of Delaware, a foreign jurisdiction, and reside in, and have assets located in, the United States. Although each of BNAF and BGF has appointed Barrick as its agent for service of process for certain securities law purposes in Ontario, it may not be possible for investors to collect from BNAF or BGF judgments obtained in Ontario courts predicated on the civil liability provisions of securities legislation. Judgments against BNAF or BGF may therefore have to be enforced in the United States and may be subject to additional defences as a result.
TABLE OF CONTENTS
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References to “$” in this prospectus are to U.S. dollars, unless otherwise indicated.
In this prospectus, Barrick Gold Corporation will be referred to as either “Barrick” or the “Guarantor”, Barrick North America Finance LLC will be referred to as “BNAF” and Barrick Gold Financeco LLC will be referred to as “BGF”. Unless the context requires otherwise, “we”, “us” and “our” refer to Barrick and its subsidiaries, including BNAF and BGF.
This prospectus has been filed with the Securities and Exchange Commission, or the SEC, as part of a registration statement on Form F-9 and Form F-3 relating to the Debt Securities and the guarantees (the “Guarantees”) by Barrick of any Debt Securities issued by BNAF or BGF and with the Ontario Securities Commission, or the OSC, in each case using a “shelf” registration process. Under this shelf process we may sell any combination of the Debt Securities described in this prospectus in one or more offerings up to a total aggregate principal amount of $2,000,000,000. This prospectus provides you with a general description of the Debt Securities we may offer. Each time we sell Debt Securities we will provide a supplement to this prospectus that will contain specific information about the terms of that offering. The prospectus supplement may also add, update or change information about the terms of the offering or of the Debt Securities to be issued. You should read both this prospectus and any prospectus supplement together with additional information described under the heading “Where You Can Find More Information” below. This prospectus does not contain all of the information set forth in the registration statement, certain parts of which are omitted in accordance with the rules and regulations of the SEC. You may refer to the registration statement and the exhibits to the registration statement for further information with respect to us and the Debt Securities.
WHERE YOU CAN FIND MORE INFORMATION
Barrick files certain reports with and furnishes other information to each of the SEC and the OSC. Our SEC file number is 1-9059. Under a multijurisdictional disclosure system adopted by the United States, such reports and other information may be prepared in accordance with the disclosure requirements of Canada, which requirements are different from those of the United States. Barrick’s reports and other information filed with the SEC since June 2002 are available, and Barrick’s reports and other information filed in the future with the SEC will be available, from the SEC’s Electronic Document Gathering and Retrieval System (http://www.sec.gov), which is commonly known by the acronym “EDGAR”, as well as from commercial document retrieval services. You may also read (and by paying a fee, copy) any document Barrick files with the SEC at the SEC’s public reference room in Washington, D.C. (100 F Street N.E., Washington, D.C. 20549). Please call the SEC at 1-800-SEC-0330 for more information on the public reference room. You may also inspect Barrick’s SEC filings at the New York Stock Exchange, 20 Broad Street, New York, New York 10005. Barrick’s OSC filings are available over the Internet at http://www.sedar.com.
The SEC and the OSC allow Barrick to “incorporate by reference” into this prospectus the information filed with them, which means that Barrick can disclose important information to you by referring you to these documents. Information has been incorporated by reference in this prospectus from documents filed with the SEC and the OSC. We will provide to each person to whom a prospectus is delivered, including any beneficial owner of Debt Securities, without charge, upon oral or written request to the secretary of Barrick at Brookfield Place, Canada Trust Tower, Suite 3700, 161 Bay Street, P.O. Box 212, Toronto, Ontario, Canada M5J 2S1, (416) 861-9911, copies of the documents incorporated herein by reference.
This prospectus incorporates by reference the documents listed below:
| • | the comparative audited consolidated financial statements of Barrick and the notes thereto for the year ended December 31, 2007 prepared in accordance with United States generally accepted accounting principles, or U.S. GAAP, together with the report of the auditors thereon and management’s discussion and analysis of financial and operating results for the year ended December 31, 2007, found on pages 25 through 76 of Barrick’s 2007 annual report (the “Consolidated Financial Statements”); |
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| • | the comparative unaudited interim consolidated financial statements of Barrick and the notes thereto for the three months ended March 31, 2008 prepared in accordance with U.S. GAAP, together with management’s discussion and analysis of financial and operating results for the three months ended March 31, 2008 found on pages 8 through 28 of Barrick’s first quarter report; |
| • | the annual information form of Barrick dated March 27, 2008 for the year ended December 31, 2007; |
| • | the management information circular of Barrick dated March 27, 2008 prepared for the annual and special meeting of Barrick shareholders held on May 6, 2008, other than the sections entitled “Report on Executive Compensation” and “Performance Graph”; |
| • | the material change report of Barrick dated March 3, 2008 regarding Barrick’s agreement with Kennecott Explorations (Australia) Ltd., a subsidiary of Rio Tinto PLC, to purchase its 40% interest in the Cortez Joint Venture in Nevada; and |
| • | the material change report of Barrick dated April 2, 2008 regarding Barrick’s Chief Executive Officer taking a leave of absence. |
After the date of this prospectus and prior to the termination of the distribution of the Debt Securities, any material change reports (excluding any confidential material change reports), annual financial statements (including the auditors’ report thereon), interim financial statements and information circulars (other than those sections, if any, in respect of the downward repricing of options, the composition of the compensation committee of the Barrick board of directors and its report on executive compensation, and the yearly percentage change in Barrick’s cumulative total shareholders return on publicly traded securities compared with the cumulative total return of the S&P/TSX Gold Index, the S&P/TSX Composite Index or any other broad equity market index or a published industry or line-of-business index) that Barrick files with the OSC will be incorporated by reference in this prospectus and will automatically update and supersede information incorporated by reference in this prospectus. In addition, any report filed or furnished by Barrick, BNAF or BGF with the SEC pursuant to Section 13(a) or 15(d) of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”) or submitted to the SEC pursuant to Rule 12g3-2(b) under the Exchange Act, after the date of this prospectus shall be deemed to be incorporated by reference into this prospectus and the registration statement of which this prospectus forms a part, if and to the extent expressly provided in such report.
Barrick, BNAF and BGF have obtained relief from the OSC (the “OSC Order”) which exempts each of BNAF and BGF from: (i) the requirements of National Instrument 51-102—Continuous Disclosure Obligations; (ii) the requirements of Multilateral Instrument 52-109—Certification of Disclosure in Issuers’ Annual and Interim Filings; (iii) the requirements under applicable securities law relating to audit committees; (iv) the requirements of National Instrument 58-101—Disclosure of Corporate Governance Practices; and (v) the requirement under Form 44-101F1 promulgated under National Instrument 44-101—Short Form Prospectus Distributions to: (A) include in this Prospectus and any prospectus supplement for any future offering of Notes earnings coverage ratios required under Section 6.1 of Form 44-101F1; and (B) incorporate by reference in this Prospectus and any prospectus supplement for any future offering of Notes any of the documents specified under paragraphs 1 through 4, 6 and 7 of Section 11.1(1) of Form 44-101F1, provided, in each case that, among other things: (X) BNAF, BGF and the Guarantor continue to satisfy all of the conditions set forth in subsection 13.4(2) of NI 51-102, other than paragraph 13.4(2)(g); (Y) the Guarantor discloses in each of its interim financial statements and annual financial statements filed with the OSC and the SEC any significant restrictions on the ability of the Guarantor to obtain funds from its subsidiaries by dividend or loan; and (Z) if certain “restricted net asset” tests that are described in greater detail in the OSC Order are met, the Guarantor provides additional disclosure in each of its interim financial statements and annual financial statements filed with the OSC and the SEC concerning: (i) the nature of any restrictions on the ability of consolidated subsidiaries and unconsolidated subsidiaries of the Guarantor to transfer funds to the Guarantor in the form of cash dividends, loans or advances and (ii) the amount of “restricted net assets”. In compliance with the requirements of the SEC, attached hereto as Schedule “A” and Schedule “B”, respectively, are the annual financial statements of the Guarantor for the year ended December 31, 2007 and the interim financial statements of the Guarantor for the three months ended
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March 31, 2008, in each case revised to include an additional note relating to BNAF and BGF. From and after May 9, 2008, being the date of formation of BNAF and BGF, the financial results of BNAF and BGF will be included in the consolidated financial results of Barrick. A copy of the OSC Order can be obtained from the OSC website at www.osc.gov.on.ca.
All information omitted from this prospectus which is permitted to be omitted under applicable securities laws will be contained in one or more supplements that will be delivered to purchasers of the Debt Securities together with this prospectus. Any such supplement to this prospectus will be incorporated by reference into this prospectus as of the date of the supplement, but only for the purposes of the offering of Debt Securities to which the supplement relates.
The documents listed above, including the Gurantor’s annual financial statements for the year ended December 31, 2007 and the Guarantor’s interim financial statements for the three months ended March 31, 2008, each of which was filed on SEDAR and would otherwise be deemed to be incorporated in this prospectus after the date of this prospectus, are not incorporated by reference to the extent that their contents are modified or superseded by any statement contained in this prospectus (including the revised financial statements attached as Schedule “A” and Schedule “B”), any amendment or supplement to this prospectus or any subsequently filed document that is also incorporated by reference in this prospectus.
You should rely only on the information contained in or incorporated by reference in this prospectus or any applicable prospectus supplement and on the other information included in the registration statement of which this prospectus forms a part. We have not authorized anyone to provide you with different or additional information. We are not making an offer of these Debt Securities in any jurisdiction where the offer is not permitted by law. You should not assume that the information contained or incorporated by reference in this prospectus or any applicable prospectus supplement is accurate as of any date other than the date on the front of any applicable prospectus supplement.
FORWARD-LOOKING INFORMATION
Certain information contained or incorporated by reference in this Preliminary Short Form Base Shelf Prospectus, including any information as to our strategy, plans or future financial or operating performance, constitutes “forward-looking statements”. All statements, other than statements of historical fact, are forward-looking statements. The words “believe”, “expect”, “anticipate”, “contemplate”, “target”, “plan”, “intends”, “continue”, “budget”, “estimate”, “may”, “will”, “schedule” and similar expressions identify forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by us, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements. Such factors include, but are not limited to: fluctuations in the currency markets (such as the Canadian and Australian dollars versus the U.S. dollar); fluctuations in the spot and forward price of gold, copper or certain other commodities (such as silver, diesel fuel and electricity); changes in U.S. dollar interest rates or gold lease rates that could impact the mark-to-market value of outstanding derivative instruments and ongoing payments/receipts under interest rate swaps and variable rate debt obligations; risks arising from holding derivative instruments (such as credit risk, market liquidity risk and mark-to-market risk); changes in national and local government legislation, taxation, controls, regulations and political or economic developments in Canada, the United States, Dominican Republic, Australia, Papua New Guinea, Chile, Peru, Argentina, Tanzania, South Africa, Pakistan, Russia or Barbados or other countries in which we do or may carry on business in the future; business opportunities that may be presented to, or pursued by, us; our ability to successfully integrate acquisitions; operating or technical difficulties in connection with mining or development activities; employee relations; availability and increasing costs associated with mining inputs and labor; the speculative nature of mineral exploration and development, including the risks of obtaining necessary licenses and permits; diminishing quantities or grades of reserves; adverse changes in our credit rating; and
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contests over title to properties, particularly title to undeveloped properties. In addition, there are risks and hazards associated with the business of mineral exploration, development and mining, including environmental hazards, industrial accidents, unusual or unexpected formations, pressures, cave-ins, flooding and gold bullion losses (and the risk of inadequate insurance, or inability to obtain insurance, to cover these risks). Many of these uncertainties and contingencies can affect our actual results and could cause actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, us. Readers are cautioned that forward-looking statements are not guarantees of future performance. All of the forward-looking statements made in this Preliminary Short Form Base Shelf Prospectus are qualified by these cautionary statements. Specific reference is made to “Narrative Description of the Business—Mineral Reserves and Mineral Resources” and “Risk Factors” in the annual information form of Barrick dated March 27, 2008 for the year ended December 31, 2007 and to the “Management’s Discussion and Analysis of Financial and Operating Results for the year ended December 31, 2007” incorporated by reference herein for a discussion of some of the factors underlying forward-looking statements.
We disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law.
Barrick is a leading international gold company. Barrick entered the gold mining industry in 1983 and is now the largest gold mining company in the world in terms of production, reserves and market capitalization. Barrick has operating mines and projects in Canada, the United States, Dominican Republic, Australia, Papua New Guinea, Peru, Chile, Argentina, Pakistan, Russia, South Africa and Tanzania. Barrick’s principal products and sources of earnings are gold and copper.
In 2007, Barrick’s mines produced approximately 8.06 million ounces of gold and 402 million pounds of copper at total cash costs of $350 per ounce and $0.83 per pound, respectively. Barrick expects to produce between 7.6 and 8.1 million ounces of gold in 2008 at expected average total cash costs of $390 to $415 per ounce. 2008 copper production is targeted at approximately 380 to 400 million pounds at expected total cash costs of approximately $1.15 to $1.25 per pound. “Total cash costs per ounce” and “Total cash cost per pound” are non-GAAP performance measures. For an explanation of Barrick’s use of these measures, including a reconciliation of “total cash costs per ounce” and “total cash cost per pound” to total cash production costs, see the discussion under the heading “Non-GAAP Performance Measures” on pages 24 to 26 of this prospectus.
Barrick is a corporation governed by the Business Corporations Act (Ontario) resulting from the amalgamation, effective July 14, 1984 under the laws of the Province of Ontario, of Camflo Mines Limited, Bob-Clare Investments Limited and the former Barrick Resources Corporation. By articles of amendment effective December 9, 1985, the Company changed its name to American Barrick Resources Corporation. Effective January 1, 1995, as a result of an amalgamation with a wholly-owned subsidiary, the Company changed its name from American Barrick Resources Corporation to Barrick Gold Corporation. In connection with its acquisition of Placer Dome Inc., Barrick amalgamated with Placer Dome Inc. pursuant to articles of amalgamation dated May 9, 2006. Barrick’s head and registered office is located at Brookfield Place, TD Canada Trust Tower, 161 Bay Street, Suite 3700, Toronto, Ontario, M5J 2S1.
BNAF and BGF are Delaware limited liability companies which were formed in May 2008 and are wholly-owned indirect subsidiaries of Barrick. Their primary purpose is the financing of other subsidiaries or affiliates of Barrick. BNAF and BGF do not plan to have other operations and they have no assets, operations, revenues or cash flows other than those which are related to the issuance, administration and repayment of the Debt Securities guaranteed by Barrick. Neither BNAF nor BGF intends to make available publicly or to its securityholders annual or other reports or other separate continuous disclosure information.
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We intend to use the net proceeds from the sale of the Debt Securities:
| • | to repay indebtedness outstanding from time to time; |
| • | to make equity investments in and advances to subsidiaries of Barrick; |
| • | for capital expenditures and investment programs; and |
| • | for other general corporate purposes. |
We may invest funds that we do not immediately require in short-term marketable securities. Specific information about the use of proceeds from the sale of any Debt Securities will be included in the applicable supplement to this prospectus.
EARNINGS COVERAGE
This earnings coverage information for the 12 months ended December 31, 2007 and the 12 months ended March 31, 2008 is prepared in accordance with Canadian disclosure requirements. The coverages have been calculated using financial information prepared in accordance with U.S. GAAP. These coverages do not reflect any offering of Debt Securities but do reflect any required adjustments for issuances and repayments of long-term debt since December 31, 2007 and servicing costs incurred in relation thereto. Specifically, Barrick’s pro forma earnings coverage calculations for the 12 months ended December 31, 2007 reflect actual interest incurred during such period, adjusted for the effect of the $990 million drawdown to partially fund the acquisition of the 40% interest in Cortez (which occurred in the first quarter of 2008) as if such drawdown had occurred on January 1, 2007.
Barrick’s earnings before interest and income taxes for the 12 months ended December 31, 2007 were $1,573 million. These earnings were 5.8 times Barrick’s pro forma interest requirements for the period of $272 million (including amounts capitalized during the period). Barrick’s actual interest requirements for the 12 months ended December 31, 2007 were $237 million (including amounts capitalized during the period), and Barrick’s earnings before interest and income taxes for this period were 6.6 times Barrick’s actual interest requirements for the period.
Barrick’s earnings before interest and income taxes for the 12 months ended March 31, 2008 were $2,322 million. These earnings were 11.2 times Barrick’s pro forma interest requirements for the period of $221 million (including amounts capitalized during the period). Barrick’s actual interest requirements for the 12 months ended March 31, 2008 were $221 million (including amounts capitalized during the period), and Barrick’s earnings before interest and income taxes for this period were 11.2 times Barrick’s actual interest requirements for the period.
DESCRIPTION OF DEBT SECURITIES AND THE GUARANTEES
In this section only, the term “Barrick” refers only to Barrick Gold Corporation without any of its subsidiaries, the term “BNAF” refers only to Barrick North America Finance LLC without any of its subsidiaries and the term “BGF” refers only to Barrick Gold Financeco LLC without any of its subsidiaries. In addition, in this section only, each of the terms “we”, “us”, or “our” refers only to Barrick in the case of Debt Securities and Guarantees issued by Barrick, and only to BNAF or BGF in the case of Debt Securities issued by BNAF or BGF, as applicable, and the term “issuer” refers only to Barrick, BNAF or BGF in the case of Securities issued by Barrick, BNAF or BGF, as applicable. This description sets forth certain general terms and provisions of the
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Debt Securities and, if issued by BNAF or BGF, the Guarantees of Barrick as Guarantor. We will provide particular terms and provisions of a series of Debt Securities, and a description of how the general terms and provisions described below may apply to that series, in a supplement to this prospectus.
The Debt Securities and Guarantees will be issued under an Indenture to be entered into between Barrick as Issuer and Guarantor, BNAF and BGF as Issuers, and The Bank of New York as trustee (the “Trustee”). The Indenture is subject to and governed by the U.S. Trust Indenture Act of 1939, as amended. A copy of the form of the Indenture has been filed as an exhibit to our registration statement filed with the SEC and with the prospectus filed with the OSC. The following summary highlights some of the provisions of the Indenture, and may not contain all of the information that is important to you. Wherever we refer to particular provisions or defined terms of the Indenture, such provisions or defined terms are incorporated in this prospectus by reference as part of the statement made, and the statement is qualified by such reference. The term “Securities” as used under this caption, refers to all securities (other than Guarantees) issued under the Indenture, including the Debt Securities.
Barrick, BNAF and BGF may issue Debt Securities and incur additional indebtedness otherwise than through the offering of Debt Securities pursuant to this prospectus.
General
The Indenture does not limit the amount of Securities which we may issue under the Indenture, and we may issue Securities in one or more series. Securities may be denominated and payable in any currency. We may offer no more than $2,000,000,000 (or the equivalent in other currencies) aggregate principal amount of Securities pursuant to this prospectus. Unless otherwise indicated in the applicable prospectus supplement, the Indenture permits us, without the consent of the holders of any Securities, to increase the principal amount of any series of Securities we previously have issued under the Indenture and to issue such increased principal amount.
The applicable prospectus supplement will set forth the following terms relating to the Securities offered by such prospectus supplement (the “Offered Securities”):
| • | whether the Offered Securities are Debt Securities issued by Barrick or guaranteed Debt Securities issued by BNAF or BGF; |
| • | the specific designation of the Offered Securities; any limit on the aggregate principal amount of the Offered Securities; the date or dates, if any, on which the Offered Securities will mature and the portion (if less than all of the principal amount) of the Offered Securities to be payable upon declaration of acceleration of maturity; |
| • | the rate or rates at which the Offered Securities will bear interest, if any, the date or dates from which any such interest will accrue and on which any such interest will be payable and the record dates for any interest payable on the Offered Securities which are in registered form; |
| • | the terms and conditions under which we may be obligated to redeem, repay or purchase the Offered Securities pursuant to any sinking fund or analogous provisions or otherwise; |
| • | the terms and conditions upon which we may redeem the Offered Securities, in whole or in part, at our option; |
| • | whether the Offered Securities will be issuable in registered form or bearer form or both, and, if issuable in bearer form, the restrictions as to the offer, sale and delivery of the Offered Securities which are in bearer form and as to exchanges between registered form and bearer form; |
| • | whether the Offered Securities will be issuable in the form of registered global securities (“Global Securities”), and, if so, the identity of the depositary for such registered Global Securities; |
| • | the denominations in which registered Offered Securities will be issuable, if other than denominations of $1,000 and any multiple thereof, and the denominations in which bearer Offered Securities will be issuable, if other than $5,000; |
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| • | each office or agency where payments on the Offered Securities will be made (if other than the offices or agencies described under “Payment” below) and each office or agency where the Offered Securities may be presented for registration of transfer or exchange; |
| • | if other than U.S. dollars, the currency in which the Offered Securities are denominated or the currency in which we will make payments on the Offered Securities; |
| • | any index, formula or other method used to determine the amount of payments of principal of (and premium, if any) or interest, if any, on the Offered Securities; and |
| • | any other terms of the Offered Securities which apply solely to the Offered Securities, or terms generally applicable to the Securities which are not to apply to the Offered Securities. |
Unless otherwise indicated in the applicable prospectus supplement:
| • | holders may not tender Securities to us for repurchase; and |
| • | the rate or rates of interest on the Securities will not increase if we become involved in a highly leveraged transaction or we are acquired by another entity. |
We may issue Securities under the Indenture bearing no interest or interest at a rate below the prevailing market rate at the time of issuance and, in such circumstances, we will offer and sell those Securities at a discount below their stated principal amount. We will describe in the applicable prospectus supplement any Canadian and U.S. federal income tax consequences and other special considerations applicable to any discounted Securities or other Securities offered and sold at par which are treated as having been issued at a discount for Canadian and/or U.S. federal income tax purposes.
Debt Securities issued by Barrick and the Guarantees will be direct, unconditional and unsecured obligations of Barrick and will rank equally among themselves and with all of Barrick’s other unsecured, unsubordinated obligations, except to the extent prescribed by law. Debt Securities issued by BNAF or BGF will be direct, unconditional and unsecured obligations of BNAF or BGF, as the case may be, and will rank equally among themselves and with all of BNAF’s or BGF’s other unsecured, unsubordinated obligations, except to the extent prescribed by law. BNAF’s and BGF’s, as the case may be, obligations under its Debt Securities will be unconditionally guaranteed by Barrick as more fully described below under “Guarantees”. Debt Securities issued by Barrick and the Guarantees will be structurally subordinated to all existing and future liabilities, including trade payables and other indebtedness, of Barrick’s subsidiaries.
Barrick has agreed to provide to the Trustee (i) annual reports containing audited financial statements and (ii) quarterly reports for the first three quarters of each fiscal year containing unaudited financial information.
Form, Denomination, Exchange and Transfer
Unless otherwise indicated in the applicable prospectus supplement, we will issue Securities only in fully registered form without coupons, and in denominations of $1,000 and multiples of $1,000. Securities may be presented for exchange and registered Securities may be presented for registration of transfer in the manner set forth in the Indenture and in the applicable prospectus supplement, without service charges. We may, however, require payment sufficient to cover any taxes or other governmental charges due in connection with the exchange or transfer. We have appointed the Trustee as security registrar. Bearer Securities and the coupons applicable to bearer Securities thereto will be transferable by delivery.
Payment
Unless otherwise indicated in the applicable prospectus supplement, we will make payments on registered Securities (other than Global Securities) at the office or agency of the Trustee, 101 Barclay Street—4E, New York, New York 10286 or, in the case of holders in Ontario, BNY Trust Company of Canada, Suite 1101, 4 King Street West, Toronto, Ontario, M5H 1B6, except that we may choose to pay interest (a) by check mailed to the
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address of the person entitled to such payment as specified in the security register or (b) by wire transfer to an account maintained by the person entitled to such payment as specified in the security register. Unless otherwise indicated in the applicable prospectus supplement, we will pay any interest due on registered Securities to the persons in whose name such registered Securities are registered on the day or days specified by us.
Registered Global Securities
Registered Debt Securities of a series may be issued in whole or in part in global form that will be deposited with, or on behalf of, a depositary identified in the prospectus supplement. Global Securities will be registered in the name of a financial institution we select, and the Debt Securities included in the Global Securities may not be transferred to the name of any other direct holder unless the special circumstances described below occur. The financial institution that acts as the sole direct holder of the Global Securities is called the “Depositary”. Any person wishing to own Debt Securities issued in the form of Global Securities must do so indirectly by virtue of an account with a broker, bank or other financial institution that, in turn, has an account with the Depositary.
Special Investor Considerations for Global Securities
Our obligations, as well as the obligations of the Trustee and those of any third parties employed by us or the Trustee, run only to persons who are registered as holders of Debt Securities. For example, once we make payment to the registered holder, we have no further responsibility for the payment even if that holder is legally required to pass the payment along to you but does not do so. As an indirect holder, an investor’s rights relating to a Global Security will be governed by the account rules of the investor’s financial institution and of the Depositary, as well as general laws relating to debt securities transfers.
An investor should be aware that when Debt Securities are issued in the form of Global Securities:
| • | the investor cannot have Debt Securities registered in his or her own name; |
| • | the investor cannot receive physical certificates for his or her interest in the Debt Securities; |
| • | the investor must look to his or her own bank or brokerage firm for payments on the Debt Securities and protection of his or her legal rights relating to the Debt Securities; |
| • | the investor may not be able to sell interests in the Debt Securities to some insurance companies and other institutions that are required by law to hold the physical certificates of Debt Securities that they own; |
| • | the Depositary’s policies will govern payments, transfers, exchange and other matters relating to the investor’s interest in the Global Security. We and the Trustee have no responsibility for any aspect of the Depositary’s actions or for its records of ownership interest in the Global Security. We and the Trustee also do not supervise the Depositary in any way; and |
| • | the Depositary will usually require that interests in a Global Security be purchased or sold within its system using same-day funds. |
Special Situations When Global Security Will be Terminated
In a few special situations described below, a Global Security will terminate and interests in it will be exchanged for physical certificates representing Debt Securities. After that exchange, an investor may choose whether to hold Debt Securities directly or indirectly through an account at its bank or brokerage firm. Investors must consult their own banks or brokers to find out how to have their interests in Debt Securities transferred into their own names, so that they will be direct holders.
The special situations for termination of a Global Security are:
| • | when the Depositary notifies us that it is unwilling, unable or no longer qualified to continue as Depositary (unless a replacement Depositary is named); and |
| • | when and if we decide to terminate a Global Security. |
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The prospectus supplement may list situations for terminating a Global Security that would apply only to the particular series of Debt Securities covered by the prospectus supplement. When a Global Security terminates, the Depositary (and not Barrick, BNAF, BGF or the Trustee) is responsible for deciding the names of the institutions that will be the initial direct holders.
Guarantees
Barrick will guarantee the payment of the principal of, premium, if any, and interest on Debt Securities issued by BNAF or BGF and any Additional Amounts payable with respect to such Securities when they become due and payable, whether at the stated maturity thereof, by declaration of acceleration or otherwise.
Certain Covenants
Limitation on Liens
Barrick will not, and will not permit any Restricted Subsidiary to, create, incur or assume any Lien (except for Permitted Liens) on any Principal Assets securing payment of Indebtedness of Barrick or any of its Subsidiaries unless the Securities (together with, at Barrick’s option, any other obligations that are not subordinate in right of payment to the Securities) are secured equally and ratably with (or prior to) any and all obligations secured or to be secured by any such Lien and for so long as such obligations are so secured. For greater certainty, the following do not constitute Liens securing payment of Indebtedness:
| • | all rights reserved to or vested in any Governmental Authority by the terms of any lease, license, franchise, grant or permit held by Barrick or any Restricted Subsidiary, or by any statutory provision, to terminate any such lease, license, franchise, grant or permit, or to require annual or other periodic payments as a condition of the continuance thereof or to distrain against or to obtain a charge on any property or assets of Barrick or any Restricted Subsidiary in the event of failure to make any such annual or other periodic payment; |
| • | any Lien upon any Principal Asset in favor of any party to a joint development or operating agreement or any similar person paying all or part of the expenses of developing or conducting operations for the recovery, storage, treatment, transportation or sale of the mineral resources of the Principal Asset (or property or assets with which it is united) that secures the payment to such person of Barrick’s or any Restricted Subsidiary’s proportionate part of such development or operating expenses; |
| • | any acquisition by Barrick or by any Restricted Subsidiary of any Principal Asset subject to any reservation or exception under the terms of which any vendor, lessor or assignor creates, reserves or excepts or has created, reserved or excepted an interest in precious metals or any other mineral or timber in place or the proceeds thereof; and |
| • | any conveyance or assignment whereby Barrick or any Restricted Subsidiary conveys or assigns to any Person or Persons an interest in precious metals or any other mineral or timber in place or the proceeds thereof. |
This covenant applies to Barrick and its Restricted Subsidiaries, which term does not include Subsidiaries of Barrick that maintain a substantial portion of their fixed assets outside of Canada or the United States.
Consolidation, Amalgamation and Merger
None of Barrick, BNAF or BGF may consolidate or amalgamate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any other Person unless:
| • | in a transaction in which Barrick, BNAF or BGF does not survive or continue in existence or in which Barrick, BNAF or BGF transfers or leases its properties and assets substantially as an entirety to any other Person, the successor entity is a corporation, partnership or trust organized under the laws of |
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| Canada or any province or territory of Canada or the United States, any state thereof or the District of Columbia or, if such transaction would not impair (as determined by the Board of Directors of Barrick by resolution) the rights of the holders of the Securities or the Guarantees, in any other country, provided that if such successor entity is organized under the laws of a jurisdiction other than Canada or any province or territory of Canada, or the United States, any state thereof or the District of Columbia, the successor entity assumes by a supplemental indenture the obligations of Barrick, BNAF or BGF, as the case may be, under the Securities, the Guarantee and the Indenture to pay Additional Amounts, adding the name of such successor jurisdiction in addition to Canada in each place that Canada appears in “- Payment of Additional Amounts” below and adding references to the provinces, territories, states or other applicable political subdivisions of such successor jurisdiction in addition to references to the provinces and territories of Canada appearing in “—Payment of Additional Amounts”; |
| • | the surviving entity shall expressly assume by a supplemental indenture the obligations of Barrick, BNAF or BGF, as the case may be, in respect of the Securities, and in the case of Barrick, the Guarantees and the performance and observance of every covenant of the Indenture to be performed or observed by Barrick, BNAF or BGF, as the case may be; |
| • | immediately before and after giving effect to any such transaction, no Event of Default or event that after notice or passage of time or both would be an Event of Default shall have occurred and be continuing; and |
| • | if, as a result of any such transaction, any Principal Assets would become subject to a Lien, then, unless such Lien could be created pursuant to the Indenture provisions described under “Limitation on Liens” above without equally securing the Securities, Barrick, prior to or simultaneously with such transaction, shall have caused the Securities to be secured equally with or prior to the indebtedness secured by such Lien. |
Certain Definitions Applicable to Covenants
“Consolidated Net Tangible Assets” means, at a particular date, the aggregate amount of assets (less applicable reserves and other properly deductible items) shown on the most recent consolidated financial statements of Barrick filed with or furnished to the SEC by Barrick (or, in the event that Barrick is not required by law or pursuant to the Indenture to file reports with the SEC, as set forth on the most recent consolidated financial statements provided to the Trustee) less (a) all current liabilities (excluding any portion constituting Funded Debt); (b) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles (excluding from intangibles, for greater certainty, mineral rights, interests in mineral properties, deferred mining, acquisition, exploration and stripping costs and deferred charges relating to hedging agreements); and (c) appropriate adjustments on account of minority interests of other persons holding shares of any of the Subsidiaries, all as set forth on the most recent balance sheet of Barrick and its consolidated Subsidiaries filed with or furnished to the SEC by Barrick (or, in the event that Barrick is not required by law or pursuant to the Indenture to file reports with the SEC, as set forth on the most recent consolidated financial statements provided to the Trustee) (but in any event, as of a date within 150 days of the date of determination) and computed in accordance with the accounting principles used in Barrick’s annual financial statements contained in Barrick’s annual report delivered to its shareholders in respect of the fiscal year immediately prior to the date of such computation; which, on the date of this prospectus, were U.S. GAAP; provided that in no event shall any amount be deducted in respect of unrealized mark-to-market adjustments (whether positive or negative and whether or not reflected in Barrick’s consolidated financial statements) relating to hedging and other financial risk management activities of Barrick or any of its Subsidiaries (including, without limitation, commodity, interest rate and foreign exchange trading and sales agreements).
“Financial Instrument Obligations” means obligations arising under:
| • | interest rate swap agreements, forward rate agreements, floor, cap or collar agreements, futures or options, insurance or other similar agreements or arrangements, or any combination thereof, entered into by a Person relating to interest rates or pursuant to which the price, value or amount payable |
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| thereunder is dependent or based upon interest rates in effect from time to time or fluctuations in interest rates occurring from time to time; |
| • | currency swap agreements, cross-currency agreements, forward agreements, floor, cap or collar agreements, futures or options, insurance or other similar agreements or arrangements, or any combination thereof, entered into by a Person relating to currency exchange rates or pursuant to which the price, value or amount payable thereunder is dependent or based upon currency exchange rates in effect from time to time or fluctuations in currency exchange rates occurring from time to time; and |
| • | commodity swap, hedging or sales agreements, floor, cap or collar agreements, commodity futures or options or other similar agreements or arrangements, or any combination thereof, entered into by a Person relating to one or more commodities or pursuant to which the price, value or amount payable thereunder is dependent or based upon the price of one or more commodities in effect from time to time or fluctuations in the price of one or more commodities occurring from time to time. |
“Funded Debt” as applied to any Person, means all indebtedness of such Person maturing after, or renewable or extendable at the option of such Person beyond, 12 months from the date of determination.
“Governmental Authority” means any nation or government, any state, province, territory or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.
“Indebtedness” means obligations for money borrowed whether or not evidenced by notes, bonds, debentures or other similar evidences of indebtedness.
“Lien” means any mortgage, lien, pledge, charge, security interest or encumbrance of any kind created, incurred or assumed in order to secure payment of Indebtedness.
“Non-Recourse Debt” means Indebtedness to finance the creation, development, construction or acquisition of properties or assets and any increases in or extensions, renewals or refinancings of such Indebtedness, provided that the recourse of the lender thereof (including any agent, trustee, receiver or other Person acting on behalf of such entity) in respect of such Indebtedness is limited in all circumstances to the properties or assets created, developed, constructed or acquired in respect of which such Indebtedness has been incurred, to the capital stock and debt securities of the Restricted Subsidiary that acquires or owns such properties or assets and to the receivables, inventory, equipment, chattels, contracts, intangibles and other assets, rights or collateral connected with the properties or assets created, developed, constructed or acquired and to which such lender has recourse.
“North American Subsidiary” means any Subsidiary that maintains a substantial portion of its fixed assets within Canada or the United States.
“Permitted Liens” means:
| • | Liens existing on the date of the Indenture, or arising thereafter pursuant to contractual commitments entered into prior to such date; |
| • | Liens securing the Securities; |
| • | Liens incidental to the conduct of the business of Barrick or any Restricted Subsidiary or the ownership of their assets that, in the aggregate, do not materially impair the operation of the business of Barrick and its Subsidiaries taken as a whole, including, without limitation, any such Liens created pursuant to joint development agreements and leases, subleases, royalties or other similar rights granted to or reserved by others; |
| • | Purchase Money Mortgages; |
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| • | any Lien on any Principal Asset existing at the time Barrick or any Restricted Subsidiary acquires the Principal Asset (or any business entity then owning the Principal Asset) whether or not assumed by Barrick or such Restricted Subsidiary and whether or not such Lien was given to secure the payment of the purchase price of the Principal Asset (or any entity then owning the Principal Asset), provided that no such Lien shall extend to any other Principal Asset; |
| • | any Lien to secure Indebtedness owing to Barrick or to another Subsidiary; |
| • | Liens on the assets of a corporation existing at the time the corporation is liquidated or merged into, or amalgamated or consolidated with, Barrick or any Restricted Subsidiary or at the time of the sale, lease or other disposition to Barrick or any Restricted Subsidiary of the properties of such corporation as, or substantially as, an entirety; |
| • | any attachment or judgment Lien provided that (i) the execution or enforcement of the judgment it secures is effectively stayed and the judgment is being contested in good faith, (ii) the judgment it secures is discharged within 60 days after the later of the entering of such judgment or the expiration of any applicable stay, or (iii) the payment of the judgment secured is covered in full (subject to a customary deductible) by insurance; |
| • | any Lien in connection with Indebtedness which by its terms is Non-Recourse Debt; |
| • | any Lien for taxes, assessments or governmental charges or levies (a) that are not yet due and delinquent or (b) the validity of which is being contested in good faith; |
| • | any Lien of materialmen, mechanics, carriers, workmen, repairmen, landlords or other similar Liens, or deposits to obtain the release of these Liens; |
| • | any Lien (a) to secure public or statutory obligations (including reclamation and closure bonds and similar obligations), (b) to secure payment of workmen’s compensation, employment insurance or other forms of governmental insurance or benefits, (c) to secure performance in connection with tenders, leases of real property, environmental, land use or other governmental or regulatory permits, bids or contracts or (d) to secure (or in lieu of) surety or appeal bonds, and Liens made in the ordinary course of business for similar purposes; |
| • | any Lien granted in the ordinary course of business in connection with Financial Instrument Obligations; |
| • | any Lien created for the sole purpose of renewing or refunding any of the Liens described in the list above, provided that the Indebtedness secured thereby shall not exceed the principal amount of Indebtedness so secured at the time of such renewal or refunding, and that such renewal or refunding Lien shall be limited to all or any part of the same property which secured the Lien renewed or refunded; and |
| • | any Lien not otherwise permitted under the list above, provided that the aggregate principal amount of Indebtedness secured by all such Liens would not then exceed 10% of Consolidated Net Tangible Assets. |
“Person” means an individual, partnership, corporation, business trust, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature.
“Principal Asset” means (i) any real property interest (all such interests forming an integral part of a single development or operation being considered as one interest), including any mining claims and leases, and any plants, buildings or other improvements thereon, and any part thereof, located in Canada or the United States that is held by Barrick or any Restricted Subsidiary and has a net book value, on the date as of which the determination is being made, exceeding 5% of Consolidated Net Tangible Assets (other than any such interest that the Board of Directors of Barrick determines by resolution is not material to the business of Barrick and its Subsidiaries taken as a whole) or (ii) any of the capital stock or debt securities issued by any Restricted Subsidiary.
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“Purchase Money Mortgage” means any Lien on any Principal Asset (or the capital stock or debt securities of any Restricted Subsidiary that acquires or owns any Principal Asset) incurred in connection with the acquisition of that Principal Asset or the construction or repair of any fixed improvements on that Principal Asset (or in connection with financing the costs of acquisition of that Principal Asset or the construction or repair of improvements on that Principal Asset) provided that the principal amount of Indebtedness secured by any such Lien shall at no time exceed 100% of the original cost to Barrick or any Restricted Subsidiary of the Principal Asset or such construction or repairs.
“Restricted Subsidiary” means any North American Subsidiary that owns or leases a Principal Asset referred to in clause (i) of the definition of “Principal Asset” or is engaged primarily in the business of owning or holding capital stock of one or more Restricted Subsidiaries. “Restricted Subsidiary”, however, does not include (1) any Subsidiary whose primary business consists of (A) financing operations in connection with leasing and conditional sale transactions on behalf of Barrick and its Subsidiaries, (B) purchasing accounts receivable or making loans secured by accounts receivable or inventory or (C) being a finance company or (2) any Subsidiary which the Board of Directors of Barrick has determined by resolution does not maintain a substantial portion of its fixed assets within Canada or the United States.
“Subsidiary” means (i) a corporation more than 50% of the outstanding Voting Stock of which at the time of determination is owned, directly or indirectly, by Barrick or by one or more Subsidiaries of Barrick and the votes carried by such Voting Stock are sufficient, if exercised, to elect a majority of the board of directors of the corporation or (ii) any other Person (other than a corporation) in which at the time of determination Barrick or one or more Subsidiaries of Barrick, directly or indirectly, has or have at least a majority ownership and power to direct the policies, management and affairs of the Person.
“Voting Stock” means securities or other ownership interests of a corporation, partnership or other entity having by the terms thereof ordinary voting power to vote in the election of the board of directors or other persons performing similar functions of such corporation, partnership or other entity (without regard to the occurrence of any contingency).
Payment of Additional Amounts
Unless otherwise specified in the applicable prospectus supplement, all payments made by or on behalf of Barrick, BNAF or BGF under or with respect to the Securities or the Guarantees will be made free and clear of and without withholding or deduction for or on account of any present or future tax, duty, levy, impost, assessment or other governmental charge (including penalties, interest and other liabilities related thereto) imposed or levied by or on behalf of the Government of Canada or any province or territory thereof or by any authority or agency therein or thereof having power to tax (hereafter “Canadian Taxes”), unless Barrick, BNAF or BGF, as the case may be, is required to withhold or deduct Canadian Taxes by law or by the interpretation or administration thereof. If Barrick, BNAF or BGF is so required to withhold or deduct any amount for or on account of Canadian Taxes from any payment made under or with respect to the Securities or the Guarantees, Barrick, BNAF or BGF, as the case may be, will pay to each holder of such Securities as additional interest such additional amounts (“Additional Amounts”) as may be necessary so that the net amount received by each such holder after such withholding or deduction (and after deducting any Canadian Taxes on such Additional Amounts) will not be less than the amount such holder would have received if such Canadian Taxes had not been withheld or deducted, except as described below. However, no Additional Amounts will be payable with respect to a payment made to a Securities holder (such holder, an “Excluded Holder”) in respect of the beneficial owner thereof:
| • | with which Barrick, BNAF or BGF, as the case may be, does not deal at arm’s length (for the purposes of the Income Tax Act (Canada)) at the time of the making of such payment; |
| • | which is subject to such Canadian Taxes by reason of the Securities holder being a resident, domiciliary or national of, engaged in business or maintaining a permanent establishment or other |
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| physical presence in or otherwise having some connection with Canada or any province or territory thereof otherwise than by the mere holding of the Securities or the receipt of payments thereunder; |
| • | which is subject to such Canadian Taxes by reason of the Securities holder’s failure to comply with any certification, identification, documentation or other reporting requirements if compliance is required by law, regulation, administrative practice or an applicable treaty as a precondition to exemption from, or a reduction in the rate of deduction or withholding of, such Canadian Taxes (provided that Barrick, BNAF or BGF advises the Trustee and the holders of the Securities then outstanding of any change in such requirements); or |
| • | which is a fiduciary or partnership or Person other than the sole beneficial owner of such payment to the extent that the Canadian Taxes would not have been imposed on such payment had such holder been the sole beneficial owner of such Securities. |
Barrick, BNAF or BGF, as the case may be, will also:
| • | make such withholding or deduction; and |
| • | remit the full amount deducted or withheld to the relevant authority in accordance with applicable law. |
Barrick, BNAF or BGF, as the case may be, will furnish to the holders of the Securities, within 60 days after the date the payment of any Canadian Taxes is due pursuant to applicable law, certified copies of tax receipts or other documents evidencing such payment by such person.
Barrick, BNAF or BGF, as the case may be, will indemnify and hold harmless each holder of Securities (other than an Excluded Holder) from and against, and upon written request reimburse each such holder for the amount (excluding any Additional Amounts that have previously been paid by Barrick, BNAF or BGF with respect thereto) of:
| • | any Canadian Taxes so levied or imposed and paid by such holder as a result of payments made under or with respect to the Securities or the Guarantees; |
| • | any liability (including penalties, interest and expenses) arising therefrom or with respect thereto; and |
| • | any Canadian Taxes imposed with respect to any reimbursement under the preceding two bullet points, but excluding any such Canadian Taxes on such holder’s net income. |
In any event, no Additional Amounts or indemnity amounts will be payable under the provisions described above in respect of any Security in excess of the Additional Amounts and the indemnity amounts which would be required if, at all relevant times, the holder of such Security were a resident of the United States for purposes of the Canada-U.S. Income Tax Convention (1980), as amended, including any protocols thereto. As a result of the limitation on the payment of Additional Amounts and indemnity amounts discussed in the preceding sentence, the Additional Amounts or indemnity amounts received by certain holders of Securities will be less than the amount of Canadian Taxes withheld or deducted or the amount of Canadian Taxes (and related amounts) levied or imposed giving rise to the obligation to pay the indemnity amounts, as the case may be, and, accordingly, the net amount received by such holders of Securities will be less than the amount such holders would have received had there been no such withholding or deduction in respect of Canadian Taxes or had such Canadian Taxes (and related amounts) not been levied or imposed.
Wherever in the Indenture there is mentioned, in any context, the payment of principal, premium, if any, interest, if any, or any other amount payable under or with respect to a Security or a Guarantee, such mention shall be deemed to include mention of the payment of Additional Amounts to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof.
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Tax Redemption
Unless otherwise specified in the applicable prospectus supplement, the applicable issuer may redeem the Securities of any series at any time, in whole but not in part, at a redemption price equal to the principal amount thereof together with accrued and unpaid interest to the date fixed for redemption, upon the giving of a notice as described below, if:
| • | as a result of any change (including any announced prospective change) in or amendment to the laws (or any regulations or rulings promulgated thereunder) of Canada (or the jurisdiction of organization of the successor to the applicable issuer or, if the Securities of such series are guaranteed by Barrick, of Barrick) or of any political subdivision or taxing authority thereof or therein affecting taxation, or any change in official position regarding the application or interpretation of such laws, regulations or rulings (including a holding by a court of competent jurisdiction), which change or amendment is announced or becomes effective on or after the date specified in the applicable prospectus supplement, and which in a written opinion to the applicable issuer or Barrick of legal counsel of recognized standing has resulted or will result (assuming, in the case of any announced prospective change, that such announced change will become effective as of the date specified in such announcement and in the form announced) in such issuer, or in the case of guaranteed Securities, Barrick becoming obligated to pay, on the next succeeding date on which interest is due, Additional Amounts with respect to any Security of such series as described under “—Payment of Additional Amounts”; or |
| • | on or after the date specified in the applicable prospectus supplement, any action has been taken by any taxing authority of, or any decision has been rendered by a court of competent jurisdiction in, Canada (or the jurisdiction of organization of the successor to the applicable issuer or, if the Securities of such series are guaranteed by Barrick, of Barrick) or any political subdivision or taxing authority thereof or therein, including any of those actions specified in the paragraph immediately above, whether or not such action was taken or decision was rendered with respect to the applicable issuer or Barrick, or any change, amendment, application or interpretation shall be officially proposed, which, in any such case, in the written opinion to the applicable issuer or Barrick of legal counsel of recognized standing, will result (assuming, in the case of any announced prospective change, that such announced change will become effective as of the date specified in such announcement and in the form announced) in such issuer, or in the case of guaranteed Securities, Barrick becoming obligated to pay, on the next succeeding date on which interest is due, Additional Amounts with respect to any Security of such series; |
and, in any such case, the applicable issuer or, in the case of guaranteed Securities, Barrick (or its successor), in its business judgment, determines that such obligation cannot be avoided by the use of reasonable measures available to it (or its successor).
In the event that Barrick, BNAF or BGF elects to redeem the Securities of any series pursuant to the provisions set forth in the preceding paragraph, it shall deliver to the Trustee a certificate, signed by an authorized officer, stating that it is entitled to redeem such Debt Securities pursuant to their terms.
Notice of intention to redeem such Debt Securities will be given not more than 60 nor less than 30 days prior to the date fixed for redemption and will specify the date fixed for redemption.
Events of Default
The term “Event of Default” with respect to Securities of any series means any of the following:
(a) default in the payment of the principal of (or any premium on) any Security of that series at its Maturity;
(b) default in the payment of any interest on any Security of that series when it becomes due and payable, and continuance of such default for a period of 30 days;
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(c) default in the deposit of any sinking fund payment when the same becomes due by the terms of the Securities of that series;
(d) default in the performance, or breach, of any other covenant or agreement of the applicable issuer or, in the case of guaranteed Securities, Barrick in the Indenture in respect of the Securities of that series (other than a covenant or agreement for which default or breach is specifically dealt with elsewhere in the Indenture), where such default or breach continues for a period of 90 days after written notice to the issuer of such Securities and, in the case of guaranteed Securities, Barrick by the Trustee or the holders of at least 25% in principal amount of all outstanding Securities affected thereby;
(e) failure to pay when due, after the expiration of any applicable grace period, any portion of the principal of, or involuntary acceleration of the maturity (which acceleration is not rescinded or annulled within 10 days) of, Indebtedness of the applicable issuer or (in the case of guaranteed Securities) Barrick having an aggregate principal amount outstanding in excess of the greater of (i) $150,000,000 and (ii) 5% of Consolidated Net Tangible Assets;
(f) certain events of bankruptcy, insolvency or reorganization; or
(g) any other Events of Default provided with respect to the Securities of that series.
If an Event of Default described in clause (a), (b) or (c) above occurs and is continuing with respect to Securities of any series, then the Trustee or the holders of not less than 25% in principal amount of the outstanding Securities of that series may require the principal amount (or, if the Securities of that series are Original Issue Discount Securities or Indexed Securities, such portion of the principal amount as may be specified in the terms of that series) of all the outstanding Securities of that series and any accrued but unpaid interest on such Securities be paid immediately. If an Event of Default described in clause (d) or (g) above occurs and is continuing with respect to Securities of one or more series, then the Trustee or the holders of not less than 25% in principal amount of the outstanding Securities of all series affected thereby (as one class) may require the principal amount (or, if any of the Securities of such affected series are Original Issue Discount Securities or Indexed Securities, such portion of the principal amount as may be specified in the terms of such affected series) of all the outstanding Securities of such affected series and any accrued but unpaid interest on such Securities be paid immediately. If an Event of Default described in clause (e) or (f) above occurs and is continuing, then the Trustee or the holders of not less than 25% in principal amount of all outstanding Securities (as a class) may require the principal amount (or, if the Securities or any series are Original Issue Discount Securities or Indexed Securities, such portion of the principal amount as may be specified in the terms of that series) of all the outstanding Securities and any accrued but unpaid interest on such Securities be paid immediately. However, at any time after a declaration of acceleration with respect to Securities of any series (or of all series, as the case may be) has been made and before a judgment or decree for payment of the money due has been obtained, the holders of a majority in principal amount of the outstanding Securities of such series (or of all series, as the case may be), by written notice to Barrick, BNAF or BGF, as applicable, and the Trustee, may, under certain circumstances, rescind and annul such acceleration. The applicable prospectus supplement will contain provisions relating to acceleration of the maturity of a portion of the principal amount of Original Issue Discount Securities or Indexed Securities upon the occurrence of any Event of Default and the continuation thereof.
Except during default, the Trustee is not obligated to exercise any of its rights and powers under the Indenture at the request or direction of any of the holders, unless the holders have offered to the Trustee reasonable indemnity. If the holders provide reasonable indemnity, the holders of a majority in principal amount of the outstanding Securities of all series affected by an Event of Default may, subject to certain limitations, direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the Securities of all series affected by such Event of Default.
No holder of a Security of any series will have any right to institute any proceedings, unless:
| • | such holder has previously given to the Trustee written notice of a continuing Event of Default with respect to the Securities of that series; |
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| • | the holders of at least 25% in principal amount of the outstanding Securities of all series affected by such Event of Default have made written request and have offered reasonable indemnity to the Trustee to institute such proceedings as trustee; and |
| • | the Trustee has failed to institute such proceeding, and has not received from the holders of a majority in the aggregate principal amount of outstanding Securities of all series affected by such Event of Default a direction inconsistent with such request, within 60 days after such notice, request and offer. |
However, these limitations do not apply to a suit instituted by the holder of a Security for the enforcement of payment of principal of or interest on such Security on or after the applicable due date of such payment.
We will be required to furnish to the Trustee annually an officers’ certificate as to the performance of certain of our obligations under the Indenture and as to any default in such performance.
Defeasance
When we use the term “defeasance”, we mean discharge from some or all of our obligations under the Indenture with respect to Securities of a particular series. If Barrick, BNAF or BGF deposits with the Trustee sufficient cash or government securities to pay the principal, interest, any premium and any other sums due to the stated maturity or a redemption date of the Securities of a particular series, then at its option:
| • | the applicable issuer and, in the case of guaranteed Securities, Barrick will each be discharged from its obligations with respect to the Securities of such series with certain exceptions, such as the obligation to pay Additional Amounts, and the holders of the Securities of the affected series will not be entitled to the benefits of the Indenture except for registration of transfer and exchange of Securities and replacement of lost, stolen or mutilated Securities and certain other limited rights. Such holders may look only to such deposited funds or obligations for payment; or |
| • | the applicable issuer and, in the case of guaranteed Securities, Barrick will no longer be under any obligation to comply with the “Limitation on Liens” covenant, the “Consolidation, Amalgamation and Merger” covenant and certain other covenants under the Indenture, and certain Events of Default will no longer apply to them. |
To exercise defeasance Barrick, BNAF or BGF also must deliver to the Trustee:
| • | an opinion of U.S. counsel to the effect that the deposit and related defeasance would not cause the holders of the Securities of the applicable series to recognize income, gain or loss for U.S. federal income tax purposes and that holders of the Securities of that series will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred; and |
| • | an opinion of Canadian counsel or a ruling from Canada Revenue Agency that there would be no such recognition of income, gain or loss for Canadian federal or provincial tax purposes and that holders of the Securities of such series will be subject to Canadian federal and provincial income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred. |
In addition, no Event of Default with respect to the Securities of the applicable series can have occurred, Barrick cannot be an insolvent person under the Bankruptcy and Insolvency Act (Canada) and neither BNAF nor BGF can be an “insolvent person” under the relevant legislation applicable to them. In order for U.S. counsel to deliver the opinion that would allow the applicable issuer and, in the case of guaranteed Securities, Barrick to be discharged from all of its obligations under the Securities of any series, the applicable issuer or, in the case of guaranteed Securities, Barrick must have received from, or there must have been published by, the Internal Revenue Service a ruling, or there must have been a change in law so that the deposit and defeasance would not cause holders of the Securities of such series to recognize income, gain or loss for U.S. federal income tax
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purposes and so that such holders would be subject to U.S. federal income tax on the same amounts, in the same manner and at the same time as would have been the case if such defeasance had not occurred.
Modifications and Waivers
We may modify or amend the Indenture with the consent of the holders of a majority in aggregate principal amount of the outstanding Securities of all series affected by such modification or amendment; provided, however, that we must receive consent from the holder of each outstanding Security of such affected series to:
| • | change the stated maturity of the principal of, or interest on, such outstanding Security; |
| • | reduce the principal amount of or interest on such outstanding Security; |
| • | reduce the amount of the principal payable upon the acceleration of the maturity of an outstanding Original Issue Discount Security; |
| • | change the place or currency of payments on such outstanding Security; |
| • | impair the right to institute suit for the enforcement of any payment on or with respect to such outstanding Security; |
| • | reduce the percentage in principal amount of outstanding Securities of such series, from which the consent of holders is required to modify or amend the Indenture or waive compliance with certain provisions of the Indenture or waive certain defaults; or |
| • | modify any provisions of the Indenture relating to modifying or amending the Indenture or waiving past defaults or covenants except as otherwise specified. |
The holders of a majority in principal amount of Securities of any series may waive our compliance with certain restrictive provisions of the Indenture with respect to such series. The holders of a majority in principal amount of outstanding Securities of all series with respect to which an Event of Default has occurred may waive any past default under the Indenture, except a default in the payment of the principal of or interest on any Security or in respect of any item listed above.
The Indenture or the Securities may be amended or supplemented, without the consent of any holder of such Securities, in order to, among other things, cure any ambiguity or inconsistency or to make any change, in any case, that does not have a materially adverse effect on the rights of any holder of such Securities.
Consent to Jurisdiction and Service
Under the Indenture, Barrick has irrevocably appointed CT Corporation System, 111 Eighth Avenue, 13 th Floor, New York, New York, 10011 as its agent for service of process in any suit, action or proceeding arising out of or relating to the Indenture, the Securities and the Guarantees and for actions brought under federal or state securities laws brought in any federal or state court located in The City of New York, and has submitted to such non-exclusive jurisdiction.
Governing Law
The Indenture, the Securities and the Guarantees will be governed by and construed in accordance with the laws of the State of New York.
Enforceability of Judgments
Since many of Barrick’s assets are outside the United States, any judgment obtained in the United States against Barrick, including judgments with respect to payments under the Guarantees, may not be collectible within the United States.
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Barrick has been informed by its Canadian counsel, Davies Ward Phillips & Vineberg LLP, that a court of competent jurisdiction in the Province of Ontario (an “Ontario Court”) would give a judgment in Canadian dollars at an exchange rate determined in accordance with the Courts of Justice Act (Ontario) based upon a final and conclusive in personam judgment of a U.S. federal or New York state court located in the State of New York (“New York Court”) for a sum certain obtained against Barrick with respect to a claim pursuant to the Indenture, without reconsideration of the merits, if:
| • | the New York Court rendering such judgment had jurisdiction over Barrick, as recognized by the courts of the Province of Ontario for purposes of enforcement of foreign judgments (and submission by Barrick in the Indenture to the non-exclusive jurisdiction of the New York Court will be sufficient for the purpose); |
| • | such judgment was: (a) not obtained by fraud or in any manner contrary to the principles of natural justice; (b) not for a claim based on any laws of the United States or the State of New York or any other jurisdiction other than the Province of Ontario which an Ontario Court would characterize under the laws of the Province of Ontario as revenue, expropriatory, penal or other public laws; (c) not contrary to public policy, as such term is interpreted under the laws of the Province of Ontario or contrary to any order made by the Attorney General of Canada under the Foreign Extraterritorial Measures Act (Canada) or by the Competition Tribunal under the Competition Act (Canada) in respect of certain judgments referred to therein; and (d) subsisting and unsatisfied and not impeachable as void or voidable under New York law; |
| • | an action to enforce the judgment is commenced in the Ontario Court within any applicable limitation period; and |
provided that:
| • | such Ontario Court has discretion to stay or decline to hear an action on such judgment if the judgment is under appeal, or there is another subsisting judgment in Ontario, New York or any other jurisdiction relating to the same cause of action as such judgment; and |
| • | an action in Ontario on such judgment may be affected by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors’ rights generally. |
Barrick has been advised by its Canadian counsel that there is some doubt as to the enforceability in Canada, against Barrick, or against any of their respective directors, officers and experts who are not residents of the United States, by a court in original actions or in actions to enforce judgments of United States courts, of civil liabilities predicated solely upon the United States federal securities laws.
The Trustee
The Trustee under the Indenture is The Bank of New York.
CERTAIN INCOME TAX CONSIDERATIONS
The applicable prospectus supplement will describe certain Canadian federal income tax consequences to investors described therein of acquiring Debt Securities, including, in the case of an investor who is not a resident of Canada (for purposes of the Income Tax Act (Canada)), if applicable, whether payment of principal, premium, if any, and interest will be subject to Canadian non-resident withholding tax.
The applicable prospectus supplement will also describe certain U.S. federal income tax consequences of the acquisition, ownership and disposition of Debt Securities by an initial investor who is a U.S. person (within the meaning of the U.S. Internal Revenue Code), if applicable, including, to the extent applicable, any such consequences relating to Debt Securities payable in a currency other than the U.S. dollar, issued at an original issue discount for U.S. federal income tax purposes or containing early redemption provisions or other special terms.
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TRADING PRICE AND VOLUME OF COMMON SHARES
The common shares of Barrick are listed and traded on the New York Stock Exchange (“NYSE”) and the Toronto Stock Exchange (the “TSX”). As a result, Barrick is required to disclose certain information herein regarding the price range and trading volume of its common shares. The data set forth herein with respect to the trading of Barrick’s common shares is not, and should not be regarded as, a representation with respect to the manner in which the Debt Securities may be traded on the secondary market in the future or that the Debt Securities, when offered and issued, will be listed and posted for trading on the NYSE or the TSX.
The following table presents the high and low closing prices for the common shares of Barrick and the average daily trading volume, on a monthly basis on the NYSE and TSX, for the twelve-month period prior to the date hereof.
| NYSE |
TSX | |||||||||||||
| Month |
High | Low | Average Daily Trading Volume |
Month |
High (Cdn$) |
Low (Cdn$) |
Average Daily Trading Volume | |||||||
| 2007 |
2007 | |||||||||||||
| May |
31.17 | 27.99 | 6,109,037 | May | 34.43 | 30.62 | 2,368,684 | |||||||
| June |
29.75 | 28.17 | 6,308,963 | June | 31.80 | 29.97 | 2,560,622 | |||||||
| July |
34.55 | 29.60 | 6,931,185 | July | 36.20 | 31.54 | 2,433,972 | |||||||
| August |
34.29 | 30.10 | 6,111,206 | August | 36.03 | 32.39 | 2,902,192 | |||||||
| September |
40.94 | 33.40 | 8,270,291 | September | 40.92 | 35.04 | 4,244,890 | |||||||
| October |
44.13 | 39.25 | 7,659,328 | October | 42.03 | 39.19 | 3,410,267 | |||||||
| November |
46.98 | 38.92 | 8,179,933 | November | 43.30 | 38.27 | 3,231,000 | |||||||
| December |
42.88 | 37.39 | 5,862,333 | December | 42.03 | 37.40 | 2,397,071 | |||||||
| 2008 |
2008 | |||||||||||||
| January |
53.57 | 46.02 | 15,677,076 | January | 53.77 | 45.65 | 5,760,544 | |||||||
| February |
53.33 | 47.54 | 9,800,512 | February | 52.00 | 47.50 | 3,543,763 | |||||||
| March |
53.55 | 41.94 | 10,287,516 | March | 52.92 | 42.77 | 4,209,308 | |||||||
| April |
46.04 | 37.50 | 8,768,611 | April | 46.12 | 37.95 | 3,719,966 | |||||||
| May (to May 29) |
42.69 | 37.36 | 9,680,315 | May (to May 29) | 42.08 | 37.96 | 3,589,050 | |||||||
We may sell Debt Securities for cash or other consideration:
| • | through agents; |
| • | through underwriters or dealers; or |
| • | directly to purchasers. |
We will describe in a prospectus supplement the specific plan of distribution for a particular series of Debt Securities, including the name or names of any underwriters or agents, the purchase price or prices of the Offered Securities, the form of consideration accepted for the Offered Securities, the proceeds to Barrick, BNAF or BGF, as the case may be, from the sale of the Offered Securities, any initial public offering price, any underwriting discount or commission and any discounts, concessions or commissions allowed or reallowed or paid by any underwriter to other dealers. Any initial public offering price and any discounts, concessions or commissions allowed or reallowed or paid to dealers may be changed from time to time.
We may distribute Debt Securities from time to time in one or more transactions:
| • | at a fixed price or prices, which may change; |
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| • | at market prices prevailing at the time of sale; |
| • | at prices related to such prevailing market prices; or |
| • | at prices to be negotiated with purchasers. |
Debt Securities may be sold through agents designated by us. The agents may solicit offers by institutions to purchase the offered Debt Securities directly from Barrick, BNAF or BGF, as the case may be, pursuant to contracts providing for payment and delivery on a future date. The applicable prospectus supplement will set forth the commission we will pay to the agents and any conditions to any such contracts.
In connection with the sale of Debt Securities, Barrick, BNAF or BGF, or purchasers of Debt Securities for whom the underwriters may act as agents may compensate the underwriters in the form of discounts, concessions or commissions. Underwriters, dealers, and agents that participate in the distribution of Debt Securities may be deemed to be underwriters and any fees or commissions received by them from Barrick, BNAF or BGF, and any profit on the resale of Debt Securities by them, may be deemed to be underwriting commissions under the U.S. Securities Act of 1933, as amended. The applicable prospectus supplement will identify any underwriters with respect to the Offered Securities.
Without limiting the generality of the foregoing, we also may issue some or all of the Debt Securities offered by this prospectus in exchange for property, including securities or assets of ours or other companies we may acquire in the future.
We may enter into agreements to indemnify underwriters, dealers and agents who participate in the distribution of Debt Securities against certain liabilities, including liabilities under the Securities Act of 1933, as amended. The underwriters, dealers and agents with whom we enter into agreements may be customers of, engage in transactions with, or perform services for us in the ordinary course of business.
This prospectus may qualify the distribution of the Debt Securities under the securities laws of the Province of Ontario to purchasers resident outside of the Province of Ontario, if a prospectus supplement specifically states that it is intended to do so. This prospectus may also qualify the distribution of the Debt Securities under the securities laws of the Province of Ontario to purchasers resident in the Province of Ontario, if a prospectus supplement specifically states that it is intended to do so. The Debt Securities may only be offered and sold in Canada : (A) in the Province of Ontario pursuant to this prospectus (if the applicable supplement so provides); or (B) pursuant to an exemption from the prospectus requirements of Ontario securities laws, or an exemption from the prospectus requirements of the securities laws of any other province or territory in which the Debt Securities are offered or sold. In addition, the Debt Securities may only be offered and sold in any province or territory of Canada by a securities dealer appropriately registered under the securities laws of that jurisdiction, or pursuant to an exemption from the registered dealer requirements of those securities laws. Each underwriter and each dealer participating in the distribution of the Offered Securities will agree, unless the applicable prospectus supplement indicates otherwise, that it will only offer or sell the Offered Securities in Canada: (A) to purchasers resident in the Province of Ontario pursuant to this prospectus (if the applicable supplement so provides), or to purchasers resident in any province or territory of Canada pursuant to an exemption from the prospectus requirements of those securities laws; and (B) in accordance with the dealer registration requirements of applicable securities laws, or pursuant to an exemption from those requirements. Except in the case of purchasers in Ontario acquiring Debt Securities pursuant to this prospectus (if the applicable supplement so provides), any Debt Securities acquired by a purchaser in Canada may be subject to resale restrictions under Canadian securities laws, which may in some cases apply to resales made to persons outside of Canada.
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Total cash costs per ounce/pound are non-GAAP financial measures. Total cash costs per ounce/pound include all costs absorbed into inventory, as well as royalties, by-product credits, production taxes and accretion expense, and exclude inventory purchase accounting adjustments and amortization. The presentation of these statistics in this manner allows Barrick to monitor and manage those factors that impact production costs on a monthly basis. Barrick calculates total cash costs based on its equity interest in production from its mines. Total cash costs per ounce/pound are calculated by dividing the aggregate of these costs by gold ounces, copper pounds sold or ore tons mined. Total cash costs and total cash costs per ounce/pound are calculated on a consistent basis for the periods presented. In Barrick’s income statement, amortization is presented separately from cost of sales. Some companies include amortization in cost of sales, which results in a different measurement of cost of sales in the income statement. Barrick has provided the reconciliations set out below to illustrate the impact of excluding amortization and inventory purchase accounting adjustments from total cash costs per ounce/pound statistics. Under purchase accounting rules, Barrick recorded the fair value of acquired work in progress and finished goods inventories as at the date of its acquisition of Placer Dome Inc. As the acquired inventory is sold, any purchase accounting adjustments reflected in the carrying amount of inventory at acquisition, impacts cost of sales. The method of valuing these inventories is based on estimated selling prices less costs to complete and a reasonable profit margin. Consequently, the fair values do not necessarily reflect costs to produce consistent with ore mined and processed into gold and copper after the acquisition.
Management believes that using an equity interest presentation is a fairer, more accurate way to measure economic performance than using a consolidated basis. For mines where Barrick holds less than a 100% share in the production, it excludes the economic share of gold production that flows to its partners who hold a non-controlling interest. Consequently, for the Tulawaka mine, although Barrick fully consolidated this mine in its Consolidated Financial Statements (which are incorporated in this prospectus by reference), its production and total cash cost statistics only reflect its equity share of the production.
In managing its mining operations, Barrick disaggregates cost of sales between amortization and the other components of cost of sales. Barrick uses total cash costs per ounce/pound statistics as a key performance measure internally to monitor the performance of its regional business units. Management uses these statistics to assess how well the Company’s regional business units are performing against internal plans, and also to assess the overall effectiveness and efficiency of the Company’s mining operations. Management also use amortization costs per ounce/pound statistics to monitor business performance. By disaggregating cost of sales into these two components and separately monitoring them, management is better able to identify and address key performance trends. Management believes that the presentation of these statistics in this manner enhances the ability of investors to assess the Company’s performance. These statistics also enable investors to better understand year-over-year changes in cash production costs, which in turn affect Barrick’s profitability and ability to generate cash flow.
The principal limitation associated with total cash costs per ounce/pound statistics is that they do not reflect the total costs to produce gold/copper, which in turn impacts the earnings of Barrick. Management believes that it has compensated for this limitation by highlighting the fact that total cash costs exclude amortization and inventory purchase accounting adjustments as well as providing details of the financial effect. Management believes that the benefits of providing disaggregated information outweigh the limitation in the method of presentation of total cash costs per ounce/pound statistics.
Total cash costs per ounce/pound statistics are intended to provide additional information, do not have any standardized meaning prescribed by U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with U.S. GAAP. The measures are not necessarily indicative of operating profit or cash flow from operations as determined under U.S. GAAP. Other companies may calculate these measures differently.
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Illustration of Impact of Excluding Certain Costs from Total Cash Costs per Ounce/Pound
| For the years ended December 31 | ||||||||||||||||||||
| ($ millions, except per ounce/pound information in dollars) | Gold | Copper1 | ||||||||||||||||||
| 2007 | 2006 | 2005 | 2007 | 2006 | ||||||||||||||||
| Cost of sales2 |
$ | 2,842 | $ | 2,348 | $ | 1,214 | $ | 342 | $ | 393 | ||||||||||
| Cost of sales at Deep South included in discontinued operations |
— | 101 | — | — | — | |||||||||||||||
| Cost of sales attributable to non-controlling interests3 |
(15 | ) | (63 | ) | (8 | ) | — | — | ||||||||||||
| Inventory purchase accounting adjustments included in cost of sales4 |
— | (11 | ) | — | (9 | ) | (97 | ) | ||||||||||||
| Cost of sales—equity basis |
2,827 | 2,375 | 1,206 | 333 | 296 | |||||||||||||||
| Amortization at producing mines—consolidated |
865 | 648 | 409 | 119 | 68 | |||||||||||||||
| Amortization at South Deep included in discontinued operations |
— | 18 | — | — | — | |||||||||||||||
| Amortization at producing mines attributable to non-controlling interests3 |
(6 | ) | (16 | ) | (5 | ) | — | — | ||||||||||||
| Amortization at producing mines—equity basis |
859 | 650 | 404 | 119 | 68 | |||||||||||||||
| Inventory purchase accounting adjustments4 |
— | 11 | — | 9 | 97 | |||||||||||||||
| Cost of sales including amortization and inventory purchase accounting adjustments—equity basis |
$ | 3,686 | $ | 3,036 | $ | 1,610 | $ | 461 | $ | 461 | ||||||||||
| Total cash costs per ounce/pound | For the years ended December 31 | |||||||||||||||||||
| Gold | Copper1 | |||||||||||||||||||
| (per ounce/pound information in dollars) |
2007 | 2006 | 2005 | 2007 | 2006 | |||||||||||||||
| Ounces/pounds sold—consolidated (thousands/millions) |
8,108 | 8,566 | 5,333 | 401 | 376 | |||||||||||||||
| Sales attributable to non-controlling interests3 |
(53 | ) | (176 | ) | (13 | ) | — | — | ||||||||||||
| Ounces/pounds sold—equity basis |
8,055 | 8,390 | 5,320 | 401 | 376 | |||||||||||||||
| Total cash costs per ounce/pound—equity basis |
$ | 350 | $ | 283 | $ | 227 | $ | 0.83 | $ | 0.79 | ||||||||||
| Amortization per ounce/pound—equity basis |
104 | 81 | 76 | 0.30 | 0.17 | |||||||||||||||
| Inventory purchase accounting adjustments per ounce/pound |
— | 1 | — | 0.02 | 0.26 | |||||||||||||||
| Cost of sales and amortization per ounce/pound attributable to non-controlling interests3 |
1 | 9 | 8 | — | — | |||||||||||||||
| Total costs per ounce/pound5—consolidated basis |
$ | 455 | $ | 374 | $ | 311 | $ | 1.15 | $ | 1.22 | ||||||||||
| 1. | The 2005 comparative periods for copper have been omitted as Barrick did not produce any significant amounts of copper prior to the production from the copper mines acquired with Placer Dome Inc. |
| 2. | The aggregate amount of cost of sales for gold and copper is as per Barrick’s Consolidated Financial Statements. |
| 3. | Relates to a 70% interest in Tulawaka and a 50% interest in South Deep prior to 2007. |
| 4. | Based on Barrick’s equity interest. |
| 5. | Includes amotization, amounts attributable to non-controlling interests and inventory purchase accounting adjustments. |
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General
Certain legal matters will be passed upon by:
| • | Shearman & Sterling LLP, our United States counsel, on matters of United States law; and |
| • | Davies Ward Phillips & Vineberg LLP, our Canadian counsel, on matters of Ontario law and the federal laws of Canada applicable in Ontario. |
Davies Ward Phillips & Vineberg LLP may rely on Shearman & Sterling LLP in issuing opinions about the validity of the Securities being sold. If different lawyers are relied on at the time of an offering of Securities, this will be included in the prospectus supplement.
On the date of this prospectus, the partners and associates of Davies Ward Phillips & Vineberg LLP and Shearman & Sterling LLP, respectively, own beneficially, directly or indirectly, less than 1% of the securities of Barrick.
DOCUMENTS FILED AS PART OF THE REGISTRATION STATEMENT
The following documents have been filed with the SEC as part of the registration statement of which this prospectus is a part:
| • | the documents listed as being incorporated by reference in this prospectus under the heading “Where You Can Find More Information” in this prospectus; |
| • | consents of accountants and counsel; |
| • | powers of attorney; |
| • | form of the trust indenture relating to the Debt Securities and the Guarantees; and |
| • | statement of eligibility of the Trustee on Form T-1. |
The comparative audited consolidated financial statements incorporated by reference in this prospectus have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, Chartered Accountants, given on the authority of that firm as experts in auditing and accounting. The address of PricewaterhouseCoopers LLP is Suite 3000, P.O. Box 82, Royal Trust Tower, Toronto-Dominion Centre, Toronto, Ontario, M5K 1G8.
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May 30, 2008
Auditors’ Consent
We have read the short form base shelf prospectus of Barrick Gold Corporation (Barrick), Barrick North America Finance LLC (BNAF) and Barrick Gold Financeco LLC (BGF) dated May 30, 2008 relating to the issue and sale of debt securities of Barrick, BNAF and BGF. We have complied with Canadian generally accepted standards for an auditor’s involvement with offering documents.
We consent to the incorporation by reference in the above-mentioned prospectus of our report to the shareholders of Barrick on the consolidated balance sheets of Barrick as at December 31, 2007 and December 31, 2006 and the consolidated statements of income, cash flows, shareholders’ equity and comprehensive income for each of the years in the three-year period ended December 31, 2007. Our report is dated February 20, 2008.
We also consent to the use in the above-mentioned prospectus of our report to the directors of Barrick on the consolidated balance sheets of Barrick as at December 31, 2007 and December 31, 2006 and the consolidated statements of income, cash flows, shareholders’ equity and comprehensive income for each of the years in the three-year period ended December 31, 2007. Our report is dated February 20, 2008 (except as to note 29 which is as of May 30, 2008).
/s/ PricewaterhouseCoopers LLC
Chartered Accountants
Toronto, Ontario
27
ANNUAL FINANCIAL STATEMENTS OF BARRICK GOLD CORPORATION
FOR THE YEAR ENDED DECEMBER 31, 2007
| PricewaterhouseCoopers LLP Chartered Accountants PO Box 82 Royal Trust Tower, Suite 3000 Toronto Dominion Centre Toronto, Ontario Canada M5K 1G8 Telephone +1 416 863 1133 Facsimile +1 416 365 8215 |
Independent Auditors’ Report
To the Directors of
Barrick Gold Corporation
We have audited the accompanying consolidated balance sheets of Barrick Gold Corporation as at December 31, 2007 and December 31, 2006, and the related consolidated statements of income, cash flow, shareholders’ equity and comprehensive income for each of the years in the three year period ended December 31, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits of the Company’s financial statements as at December 31, 2007 and December 31, 2006 and for each of the years then ended in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). We conducted our audit of the Company’s financial statements for the year ended December 31, 2005 in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. A financial statement audit also includes assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as at December 31, 2007 and December 31, 2006 and the results of its operations and its cash flows for each of the years in the three year period ended December 31, 2007 in accordance with accounting principles generally accepted in the United States of America.
/s/ PricewaterhouseCoopers LLP
Chartered Accountants, Licensed Public Accountants
Toronto, Canada
February 20, 2008
except for note 29 which is as of May 30, 2008.
PricewaterhouseCoopers refers to the Canadian firm of PricewaterhouseCoopers LLP and the other member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.
A-1
Comments by Auditors for U.S. Readers on Canada-U.S. Reporting Differences
In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when there is a change in accounting principles that has a material effect on the comparability of the Company’s financial statements, such as the changes described in Note 2e to these consolidated financial statements. Our report to the directors dated February 20, 2008 (except note 29 which is as of May 30, 2008) is expressed in accordance with Canadian reporting standards which do not require a reference to such a change in accounting principles in the Auditors’ report when the change is properly accounted for and adequately disclosed in the financial statements.
/s/ PricewaterhouseCoopers LLP
Chartered Accountants, Licensed Public Accountants
Toronto, Canada
February 20, 2008
except for note 29 which is as of May 30, 2008
A-2
Consolidated Statements of Income
Barrick Gold Corporation
For the years ended December 31 (in millions of United States Dollars, Except Per Share Data)
| 2007 | 2006 | 2005 | ||||||||||
| Sales (notes 4 and 5) |
$ | 6,332 | $ | 5,630 | $ | 2,348 | ||||||
| Costs and expenses |
||||||||||||
| Cost of sales1 (note 6) |
3,184 | 2,741 | 1,198 | |||||||||
| Amortization (note 4) |
1,004 | 735 | 427 | |||||||||
| Corporate administration |
155 | 142 | 71 | |||||||||
| Exploration (notes 4 and 7) |
179 | 171 | 109 | |||||||||
| Project development expense (note 7) |
188 | 119 | 32 | |||||||||
| Other expense (note 8A) |
208 | 216 | 114 | |||||||||
| Impairment charges (note 8B) |
65 | 23 | 16 | |||||||||
| 4,983 | 4,147 | 1,967 | ||||||||||
| Interest income |
141 | 110 | 38 | |||||||||
| Interest expense (note 20B) |
(113 | ) | 126 | ) | (3 | ) | ||||||
| Other income (note 8C) |
103 | 93 | 46 | |||||||||
| 131 | 77 | 81 | ||||||||||
| Income from continuing operations before income taxes and other items |
1,480 | 1,560 | 462 | |||||||||
| Income tax expense (note 9) |
(341 | ) | (348 | ) | (60 | ) | ||||||
| Non-controlling interests (note 2C) |
14 | 1 | (1 | ) | ||||||||
| Equity in investees (note 12) |
(43 | ) | (4 | ) | (6 | ) | ||||||
| Income from continuing operations |
1,110 | 1,209 | 395 | |||||||||
| Income from discontinued operations (note 3H) |
9 | 297 | — | |||||||||
| Income before cumulative effect of changes in accounting principles |
1,119 | 1,506 | 395 | |||||||||
| Cumulative effect of changes in accounting principles |
— | — | 6 | |||||||||
| Net income for the year |
$ | 1,119 | $ | 1,506 | $ | 401 | ||||||
| Earnings per share data (note 10) |
||||||||||||
| Income from continuing operations |
||||||||||||
| Basic |
$ | 1.28 | $ | 1.44 | $ | 0.74 | ||||||
| Diluted |
$ | 1.27 | $ | 1.42 | $ | 0.73 | ||||||
| Net income |
||||||||||||
| Basic |
$ | 1.29 | $ | 1.79 | $ | 0.75 | ||||||
| Diluted |
$ | 1.28 | $ | 1.77 | $ | 0.75 | ||||||
| 1 | Exclusive of amortization (note 6). |
The accompanying notes are an integral part of these consolidated financial statements.
A-3
Consolidated Statements of Cash Flow
Barrick Gold Corporation
For the years ended December 31 (in millions of United States dollars)
| 2007 | 2006 | 2005 | ||||||||||
| OPERATING ACTIVITIES |
||||||||||||
| Net income |
$ | 1,119 | $ | 1,506 | $ | 401 | ||||||
| Amortization (note 4) |
1,004 | 735 | 427 | |||||||||
| Income tax expense (notes 9 and 23) |
341 | 348 | 60 | |||||||||
| Gains on sale of investments (note 8C) |
(71 | ) | (6 | ) | (17 | ) | ||||||
| Revisions to AROs at closed mines (notes 8A and 21) |
6 | 53 | 15 | |||||||||
| Income taxes paid |
(585 | ) | (280 | ) | (80 | ) | ||||||
| Income from discontinued operations (note 3H) |
(9 | ) | (297 | ) | — | |||||||
| Other items (note 11A) |
(73 | ) | 63 | (80 | ) | |||||||
| Net cash provided by operating activities |
1,732 | 2,122 | 726 | |||||||||
| INVESTING ACTIVITIES |
||||||||||||
| Property, plant and equipment |
||||||||||||
| Capital expenditures (note 4) |
(1,046 | ) | (1,087 | ) | (1,104 | ) | ||||||
| Sales proceeds |
100 | 8 | 8 | |||||||||
| Acquisitions, net of cash acquired of $13 million (2006: $1,108 million) (note 3) |
(1,122 | ) | (208 | ) | — | |||||||
| Investments (note 12) |
||||||||||||
| Purchases |
(11 | ) | (369 | ) | (89 | ) | ||||||
| Sales |
625 | 46 | 10 | |||||||||
| Reclassifications (note 12) |
(66 | ) | — | — | ||||||||
| Other investing activities (note 11B) |
(42 | ) | 17 | (5 | ) | |||||||
| Net cash used in investing activities |
(1,562 | ) | (1,593 | ) | (1,180 | ) | ||||||
| FINANCING ACTIVITIES |
||||||||||||
| Capital stock |
||||||||||||
| Proceeds on exercise of stock options |
142 | 74 | 92 | |||||||||
| Dividends (note 24A) |
(261 | ) | (191 | ) | (118 | ) | ||||||
| Long-term debt (note 20B) |
||||||||||||
| Proceeds |
408 | 2,189 | 179 | |||||||||
| Repayments |
(1,128 | ) | (1,581 | ) | (59 | ) | ||||||
| Settlement of derivative instruments acquired with Placer Dome |
(197 | ) | (1,840 | ) | — | |||||||
| Other financing activities |
— | 2 | (1 | ) | ||||||||
| Net cash (used in) provided by financing activities |
(1,036 | ) | (1,347 | ) | 93 | |||||||
| CASH FLOWS OF DISCONTINUED OPERATIONS |
||||||||||||
| Operating activities |
21 | 29 | — | |||||||||
| Investing activities |
— | 2,788 | — | |||||||||
| Financing activities |
— | 11 | — | |||||||||
| 21 | 2,828 | — | ||||||||||
| Effect of exchange rate changes on cash and equivalents |
9 | (4 | ) | — | ||||||||
| Net increase (decrease) in cash and equivalents |
(836 | ) | 2,006 | (361 | ) | |||||||
| Cash and equivalents at beginning of year (note 20A) |
3,043 | 1,037 | 1,398 | |||||||||
| Cash and equivalents at end of year (note 20A) |
$ | 2,207 | $ | 3,043 | $ | 1,037 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
A-4
Consolidated Balance Sheets
Barrick Gold Corporation
At December 31 (in millions of United States dollars)
| 2007 | 2006 | |||||
| ASSETS |
||||||
| Current assets |
||||||
| Cash and equivalents (note 20A) |
$ | 2,207 | $ | 3,043 | ||
| Accounts receivable (note 14) |
256 | 234 | ||||
| Inventories (note 13) |
1,118 | 931 | ||||
| Other current assets (note 14) |
707 | 588 | ||||
| 4,288 | 4,796 | |||||
| Non-current assets |
||||||
| Investments (note 12) |
142 | 646 | ||||
| Equity method investments (note 12) |
1,074 | 327 | ||||
| Property, plant and equipment (note 15) |
8,596 | 8,390 | ||||
| Intangible assets (note 16) |
68 | 75 | ||||
| Goodwill (note 17) |
5,847 | 5,855 | ||||
| Other assets (note 18) |
1,936 | 1,421 | ||||
| Total assets |
$ | 21,951 | $ | 21,510 | ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||
| Current liabilities |
||||||
| Accounts payable |
808 | $ | 686 | |||
| Short-term debt (note 20B) |
233 | 863 | ||||
| Other current liabilities (note 19) |
255 | 303 | ||||
| 1,296 | 1,852 | |||||
| Non-current liabilities |
||||||
| Long-term debt (note 20B) |
3,153 | 3,244 | ||||
| Asset retirement obligations (note 21) |
892 | 843 | ||||
| Deferred income tax liabilities (note 23) |
841 | 798 | ||||
| Other liabilities (note 22) |
431 | 518 | ||||
| Total liabilities |
6,613 | 7,255 | ||||
| Non-controlling interests |
82 | 56 | ||||
| Shareholders’ equity |
||||||
| Capital stock (note 24) |
13,273 | 13,106 | ||||
| Retained earnings |
1,832 | 974 | ||||
| Accumulated other comprehensive income (note 25) |
151 | 119 | ||||
| Total shareholders’ equity |
15,256 | 14,199 | ||||
| Contingencies and commitments (notes 15 and 28) |
||||||
| Total liabilities and shareholders’ equity |
$ | 21,951 | $ | 21,510 | ||
The accompanying notes are an integral part of these consolidated financial statements.
A-5
Consolidated Statements of Shareholders’ Equity
Barrick Gold Corporation
For the years ended December 31 (in millions of United States dollars)
| 2007 | 2006 | 2005 | ||||||||||
| Common shares (number in millions) |
||||||||||||
| At January 1 |
864 | 538 | 534 | |||||||||
| Issued on exercise of stock options (note 26A) |
6 | 3 | 4 | |||||||||
| Issued on acquisition of Placer Dome |
— | 323 | — | |||||||||
| At December 31 |
870 | 864 | 538 | |||||||||
| Common shares |
||||||||||||
| At January 1 |
$ | 13,106 | $ | 4,222 | $ | 4,129 | ||||||
| Issued on exercise of stock options (note 26A) |
142 | 74 | 93 | |||||||||
| Issued on acquisition of Placer Dome (note 3G) |
— | 8,761 | — | |||||||||
| Options issued on acquisition of Placer Dome (note 3G) |
— | 22 | — | |||||||||
| Recognition of stock option expense (note 26A) |
25 | 27 | — | |||||||||
| At December 31 |
13,273 | 13,106 | 4,222 | |||||||||
| Retained earnings (deficit) |
||||||||||||
| At January 1 |
974 | (341 | ) | (624 | ) | |||||||
| Net income |
1,119 | 1,506 | 401 | |||||||||
| Dividends (note 24A) |
(261 | ) | (191 | ) | (118 | ) | ||||||
| At December 31 |
1,832 | 974 | (341 | ) | ||||||||
| Accumulated other comprehensive income (loss) (note 25) |
151 | 119 | (31 | ) | ||||||||
| Total shareholders’ equity at December 31 |
$ | 15,256 | $ | 14,199 | $ | 3,850 | ||||||
Consolidated Statements of Comprehensive Income
Barrick Gold Corporation
For the years ended December 31 (in millions of United States dollars)
| 2007 | 2006 | 2005 | ||||||||
| Net income |
$ | 1,119 | $ | 1,506 | $ | 401 | ||||
| Other comprehensive income (loss), net of tax (note 25) |
32 | 150 | (100 | ) | ||||||
| Comprehensive income |
$ | 1,151 | $ | 1,656 | $ | 301 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
A-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Barrick Gold Corporation. Tabular dollar amounts in millions of United States dollars, unless otherwise shown. References to C$, A$, ZAR, EUR, CLP, ARS, PGK and TZS are to Canadian dollars, Australian dollars, South African Rands, Euros, Chilean Pesos, Argentinean Pesos, Papua New Guinea Kina and Tanzanian Schillings respectively.
1 > NATURE OF OPERATIONS
Barrick Gold Corporation (“Barrick” or the “Company”) principally engages in the production and sale of gold, as well as related activities such as exploration and mine development. We also produce some copper and hold interests in a platinum group metals development project and a nickel development project, both located in Africa, and a platinum group metals project located in Russia. Our mining operations are concentrated in our four regional business units: North America, South America, Africa and Australia Pacific. We sell our gold production into the world market and we sell our copper production into the world market and to private customers.
2 > SIGNIFICANT ACCOUNTING POLICIES
A Basis of Preparation
These consolidated financial statements have been prepared under United States generally accepted accounting principles (“US GAAP”). In 2007, we amended the income statement classification of certain income and expense items, including non-hedge derivative gains and losses (see note 2E), to provide enhanced disclosure of significant business activities and reflect the increasing significance of amounts spent on those activities. To ensure comparability of financial information, prior year amounts have been reclassified to reflect changes in the financial statement presentation.
B Principles of Consolidation
These consolidated financial statements include the accounts of Barrick Gold Corporation and those entities we have the ability to control either through voting rights or means other than voting rights. FIN 46R provides guidance on the identification and reporting of entities controlled through means other than voting rights and defines such entities as variable interest entities (“VIEs”). We apply this guidance to all entities, including those in the development stage, except for unincorporated joint ventures, which are outside the scope of FIN 46R. For VIEs where we are the primary beneficiary, we consolidate the entity and record a non-controlling interest, measured initially at its estimated fair value, for the interest held by other entity owners. For VIEs where we are not the primary beneficiary we use the equity method of accounting.
For incorporated joint ventures (“JVs”) where we have the ability to exercise control, subject in some cases to protective rights held by our JV partners, we consolidate the JV and record a non-controlling interest for the interest held by our JV partner. For incorporated JVs where we do not have the ability to exercise control, we account for our investment using the equity method of accounting. For unincorporated JVs under which we hold an undivided interest in the assets and liabilities of the joint venture, we include our pro rata share of the assets and liabilities in our financial statements.
A-7
The following table illustrates our policy used to account for significant entities where we hold less than a 100% economic interest. We consolidate all other wholly owned entities.
Consolidation Method at December 31, 2007
| Entity type at Dec 31, 2007 | Economic Interest | Method | |||||
| North America |
|||||||
| Round Mountain Mine |
Unincorporated JV | 50 | % | Pro Rata | |||
| Hemlo Property Mine |
Unincorporated JV | 50 | % | Pro Rata | |||
| Marigold Mine |
Unincorporated JV | 33 | % | Pro Rata | |||
| Cortez Mine1 |
Unincorporated JV | 60 | % | Pro Rata | |||
| Turquoise Ridge Mine |
Unincorporated JV | 75 | % | Pro Rata | |||
| Pueblo Viejo Project |
VIE | 60 | % | Consolidation | |||
| Donlin Creek Project2 |
VIE | 50 | % | Equity Method | |||
| South America |
|||||||
| Cerro Casale Project |
VIE | 51 | % | Equity Method | |||
| Australia |
|||||||
| Kalgoorlie Mine |
Unincorporated JV | 50 | % | Pro Rata | |||
| Porgera Mine3 |
Unincorporated JV | 95 | % | Pro Rata | |||
| Reko Diq Project4 |
VIE | 37.5 | % | Equity Method | |||
| Africa |
|||||||
| Tulawaka Mine |
Corporate Joint Venture | 70 | % | Consolidation | |||
| Kabanga Project5 |
VIE | 50 | % | Equity Method | |||
| Sedibelo Project6 |
Not Applicable | 50 | % | Consolidation | |||
| Russia |
|||||||
| Fedorova Project7 |
VIE | 50 | % | Consolidation |
| 1 | Including Cortez Hills Project. |
| 2 | For the period from January 2006 until November 2007, we recorded our proportionate 70% share of project expenditures in project development expense based on the previous joint venture agreement. Effective in November 2007, a new agreement was reached with our partner which caused us to classify our interest as an equity method investment on a prospective basis (note 12). |
| 3 | We hold an undivided interest in our share of assets and liabilities at the Porgera mine. In August 2007, we increased our ownership interest from 75% to 95% (note 3E). |
| 4 | We hold a 50% interest in Atacama Copper, which has a 75% interest in the Reko Diq project. We use the equity method to account for our interest in Atacama Copper (note 12). |
| 5 | In accordance with an agreement with our partner, in 2007 and 2006 our partner was responsible for funding 100% of exploration and project expenditures and we did not record any amounts for our economic interest in this period. After our partner has funded $145 million of exploration and project expenditures we will be responsible for funding our share of future expenditures. At December 31, 2007 our partner had spent $103 million of this funding commitment. |
| 6 | Until completion of a bankable feasibility study (“BFS”), we are responsible for funding 100% of project expenditures at the Sedibelo project. In the year ended December 31, 2007, we recorded project development expenses totaling $22 million (2006: $10 million). On completion of a BFS, as part of our earn-in agreement, we are entitled to earn a 50% economic interest in the entity that owns the Sedibelo project and to recoup from our partner their 50% share of the costs to complete the BFS. |
| 7 | In accordance with our agreement with minority shareholders, we have an earn-in option for an additional 29% interest in the entity that owns the rights to the Fedorova project (for a total 79% interest), provided that we deliver a BFS by January 1, 2009. We are responsible for funding 100% of project expenditures until the BFS is finalized, and therefore a non-controlling interest has not been recorded through December 31, 2007. |
| BARRICK YEAR-END 2008 |
A-8 | NOTES TO FINANCIAL STATEMENTS |
Entities Consolidated using the Pro Rata Method Income Statement and Cash Flow Information (100%)
| For the years ended Dec.31 |
2007 | 2006 | 2005 | |||||||||
| Revenues |
$ | 2,076 | $ | 1,776 | $ | 1,009 | ||||||
| Costs and expenses |
(1,665 | ) | (1,457 | ) | (796 | ) | ||||||
| Net income |
$ | 411 | $ | 319 | $ | 213 | ||||||
| Operating activities1 |
$ | 147 | $ | 473 | $ | 318 | ||||||
| Investing activities1 |
$ | (139 | ) | $ | (284 | ) | $ | (75 | ) | |||
| Financing activities1,2 |
$ | 81 | $ | (185 | ) | $ | (237 | ) | ||||
| 1 | Net cash inflow (outflow). |
| 2 | Includes cash flows between the joint ventures and joint venture partners. |
Balance Sheet Information (100%)
| At December 31 |
2007 | 2006 | ||||
| Assets |
||||||
| Inventories |
$ | 430 | $ | 365 | ||
| Property, plant and equipment |
2,620 | 2,468 | ||||
| Other assets |
462 | 126 | ||||
| $ | 3,512 | $ | 2,959 | |||
| Liabilities |
||||||
| Current liabilities |
$ | 216 | $ | 205 | ||
| Long-term obligations |
267 | 202 | ||||
| Deferred tax |
47 | 42 | ||||
| $ | 530 | $ | 449 | |||
Non-controlling Interests—Income Statement
| For the years ended December 31 |
2007 | 2006 | 2005 | |||||||||
| Pueblo Viejo project |
$ | 30 | $ | 9 | $ | — | ||||||
| Tulawaka mine |
(16 | ) | (8 | ) | (2 | ) | ||||||
| Other |
— | — | 1 | |||||||||
| $ | 14 | $ | 1 | $ | (1 | ) | ||||||
C Foreign Currency Translation
The functional currency of all our operations is the US dollar. We translate non-US dollar balances into US dollars as follows:
| • | Property, plant and equipment, intangible assets and equity method investments using historical rates; |
| • | Available for sale securities using closing rates with translation gains and losses recorded in other comprehensive income; |
| • | Asset retirement obligations using historical rates; |
| • | Long-term debt using closing rates; |
| • | Deferred tax assets and liabilities using closing rates with translation gains and losses recorded in income tax expense; |
| BARRICK YEAR-END 2008 |
A-9 | NOTES TO FINANCIAL STATEMENTS |
| • | Other assets and liabilities using closing rates with translation gains and losses recorded in other income/expense; and |
| • | Income and expenses using average exchange rates, except for expenses that relate to non-monetary assets and liabilities measured at historical rates, which are translated using the same historical rate as the associated non-monetary assets and liabilities. |
D Use of Estimates
The preparation of these financial statements requires us to make estimates and assumptions. The most significant ones are: quantities of proven and probable mineral reserves; fair values of acquired assets and liabilities under business combinations, including the value of mineralized material beyond proven and probable mineral reserves; future costs and expenses to produce proven and probable mineral reserves; future commodity prices for gold, copper, silver and other products; the future cost of asset retirement obligations; amounts and likelihood of contingencies; the fair values of reporting units that include goodwill; and uncertain tax positions. Using these and other estimates and assumptions, we make various decisions in preparing the financial statements including:
| • | The treatment of expenditures at mineral properties prior to when production begins as either an asset or an expense (note 15); |
| • | Whether tangible and intangible long-lived assets are impaired, and if so, estimates of the fair value of those assets and any corresponding impairment charge (note 15); |
| • | Our ability to realize deferred income tax assets and amounts recorded for any corresponding valuation allowances (note 23); |
| • | The useful lives of tangible and intangible long-lived assets and the measurement of amortization (note 15); |
| • | The fair value of asset retirement obligations (note 21); |
| • | Whether to record a liability for loss contingencies and the amount of any liability (notes 15 and 28); |
| • | Whether investments are other than temporarily impaired (note 12); |
| • | The amount of income tax expense (note 9); |
| • | Allocations of the purchase price in business combinations to assets and liabilities acquired, including goodwill (notes 3 and 17); |
| • | Whether any impairments of goodwill have occurred and if so the amounts of impairment charges (note 17); |
| • | Transfers of value beyond proven and probable reserves to amortized assets (note 15); |
| • | Amounts recorded for uncertain tax positions (note 23), and |
| • | The timing and amounts recorded of proceeds for insurable losses under insurance claims (note 15). |
As the estimation process is inherently uncertain, actual future outcomes could differ from present estimates and assumptions, potentially having material future effects on our financial statements.
| BARRICK YEAR-END 2008 |
A-10 | NOTES TO FINANCIAL STATEMENTS |
E Accounting Changes
Accounting Changes Implemented in 2007
FSP AUG AIR—1—Accounting for Planned Major Maintenance Activities (FSP AIR-1)
On January 1, 2007, we adopted FSP AIR-1 which amends guidance from the AICPA Industry Audit Guide, Audits of Airlines (“Airline Guide”) with respect to planned major maintenance activities and makes this guidance applicable to entities in all industries. Of the three methods of accounting for planned major maintenance allowed by FSP AIR-1, we adopted the built-in overhaul method. The built-in overhaul method is based on segregation of plant and equipment costs into those that should be depreciated over the useful life of the asset and those that require overhaul at periodic intervals. The estimated cost of the overhaul component included in the purchase price of an asset is set up separately from the cost of the asset and is amortized to the expected date of the initial overhaul. The cost of the initial overhaul is then capitalized and amortized to the next overhaul, at which time the process is repeated. We adopted FSP AIR-1 on January 1, 2007. The implementation of this standard did not have a material impact on our Financial Statements.
FASB Interpretation No. 48—Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (Accounting for Income Taxes) (FIN 48)
In June 2006, the Financial Accounting Standards Board (FASB) issued FIN 48 to create a single model to address accounting for uncertainty in tax positions. FIN 48 clarifies the accounting for income taxes, by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on de-recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006.
We adopted the provisions of FIN 48, Accounting for Uncertainty in Income Taxes, on January 1, 2007. As a result of the implementation of FIN 48, no adjustment was required to the liability for unrecognized tax benefits.
Change in Financial Statement Presentation—Derivative Gains and Losses
In 2007, we made a change in the financial statement classification of changes in the fair value of derivative instruments that do not qualify for hedge accounting under FAS 133 (non-hedge derivatives), which was retroactively applied. Prior to this change, we recorded the change in fair value of all non-hedge derivative gains and losses as a component of other income, with the exception of changes in the fair value of embedded derivatives implicit in concentrate sales contracts, which were recorded as a component of revenue.
Beginning in 2007, we record changes in the fair value of non-hedge derivatives in a manner consistent with the intended purpose of the instrument as follows: gold and copper derivative instruments are recorded in revenue; silver and fuel derivative contracts are recorded in cost of sales; interest rate swaps are recorded in interest income or interest expense, depending on the intended purpose of the swap; and share purchase warrants are recorded in other income.
The impact of this change in accounting policy for prior periods was as follows:
| For the years ended December 31 |
Increase (decrease) |
|||||||
| 2006 | 2005 | |||||||
| Gold revenue |
$ | 8 | $ | (2 | ) | |||
| Copper revenue |
(14 | ) | — | |||||
| Cost of sales |
5 | (16 | ) | |||||
| Other expense |
— | 20 | ||||||
| Interest income |
9 | — | ||||||
| Interest expense |
— | (4 | ) | |||||
| Other income |
2 | 2 | ||||||
| BARRICK YEAR-END 2008 |
A-11 | NOTES TO FINANCIAL STATEMENTS |
Accounting Changes Implemented in 2006
FAS 123R, Accounting for Stock—Based Compensation
On January 1, 2006, we adopted FAS 123R. Prior to this date we applied FAS 123 and accounted for stock options under the intrinsic value method, recording compensation cost for stock options as the excess of the market price of the stock at the grant date of an award over the exercise price. Historically, the exercise price of stock options equaled the market price of the stock at the grant date resulting in no recorded compensation cost. We provided pro forma disclosure of the effect of expensing the fair value of stock options.
We adopted FAS 123R using the modified prospective method, which meant that financial statements for periods prior to adoption were not restated. From January 1, 2006 we recorded compensation expense for all new stock option grants based on the grant date fair value, amortized on a straight-line basis over the vesting period. We also recorded compensation expense for the unvested portion of stock option grants occurring prior to January 1, 2006, based on the grant date fair value that was previously estimated and used to provide for pro forma disclosures for financial statement periods prior to 2006, amortized on a straight-line basis over the remaining vesting period for those unvested stock options. Details of stock-based compensation expense are included in note 26.
The application of FAS 123R to Restricted Share Units (RSUs) and Deferred Share Units (DSUs) did not result in any significant change in the method of accounting for RSUs or DSUs.
FAS 151, Inventory Costs
FAS 151 specifies the general principles applicable to the pricing and allocation of certain costs to inventory. Under FAS 151, abnormal amounts of idle facility expense, freight, handling costs and wasted materials are recognized as current period charges rather than capitalized to inventory. FAS 151 also requires that the allocation of fixed production overhead to the cost of inventory be based on the normal capacity of production facilities.
FAS 151 was applicable prospectively from January 1, 2006 and we modified our inventory accounting policy consistent with its requirements. Under our modified accounting policy for inventory, production-type costs that are considered abnormal are excluded from inventory and charged directly to the cost of sales. Interruptions to normal activity levels at a mine could occur for a variety of reasons including equipment failures and major maintenance activities, strikes, power supply interruptions and adverse weather conditions. When such interruptions occur we evaluate the impact on the cost of inventory produced in the period, and to the extent the actual cost exceeds the cost based on normal capacity we expense any excess directly to cost of sales. The adoption of FAS 151 did not have any significant effect on our financial statements.
FAS 158, Employers’ Accounting for Defined Benefit Pension and Other Post-retirement Plans
In September 2006, the FASB issued FAS 158 that requires employers to fully recognize the obligations associated with single-employer defined benefit pension, retiree health care and other post-retirement plans in their financial statements. FAS 158 was developed to respond to concerns that past accounting standards needed to be revisited to improve the transparency and usefulness of the information reported. Under past accounting standards, the funded status of an employer’s post-retirement benefit plan (i.e., the difference between the plan assets and obligations) was not completely reported in the balance sheet. Employers reported an asset or liability that differed from the plan’s funded status because previous accounting standards allowed employers to delay recognition of certain changes in plan assets and obligations that affected the costs of providing such benefits. Past standards only required an employer to disclose the funded status of its plans in the notes to the financial statements.
FAS 158 requires recognition of the funded status of a benefit plan on the balance sheet—measured as the difference between plan assets at fair value (with limited exceptions) and the benefit obligation, as at the fiscal
| BARRICK YEAR-END 2008 |
A-12 | NOTES TO FINANCIAL STATEMENTS |
year-end. For a pension plan, the benefit obligation is the projected benefit obligation; for any other post- retirement benefit plan, such as a retiree health care plan, the benefit obligation is the accumulated post-retirement benefit obligation. FAS 158 also requires recognition, as a component of other comprehensive income, net of tax, of the gains or losses and prior service costs or credits that arise during the period but are not recorded as components of net periodic benefit cost. Amounts recorded in accumulated other comprehensive income are adjusted as they are subsequently recorded as components of net periodic cost. FAS 158 requires disclosure of information about certain effects of net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition asset or obligation.
We adopted the provisions of FAS 158 in 2006, as required, except for the requirement to measure the plan assets and benefit obligations at the fiscal year-end, which is effective in fiscal years ending after December 15, 2008. The adoption of FAS 158 did not significantly impact our financial statements.
SEC Staff Accounting Bulletin No. 108—Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (SAB 108)
In September 2006, the SEC issued SAB 108, which was effective in fourth quarter 2006 for Barrick. SAB 108 addresses the multiple methods used to quantify financial statement misstatements and evaluate the accumulation of misstatements on the balance sheet. SAB 108 requires registrants to evaluate prior period misstatements using both a balance sheet approach (“the iron curtain method”) and an income statement approach (“the rollover method”). Barrick historically used the rollover method in quantifying potential financial statement misstatements. As required by SAB 108, we re-evaluated prior period immaterial errors using the iron curtain method. Based upon the result of our evaluation, we did not identify any material errors or misstatements that were previously deemed not material under the rollover approach.
Accounting Changes Implemented in 2005
EITF 04-6 Accounting for Stripping Costs Incurred During Production in the Mining Industry
In 2005, we adopted EITF 04-6 and changed our accounting policy for stripping costs incurred in the production phase. Prior to adopting EITF 04-6, we capitalized stripping costs incurred in the production phase, and we recorded amortization of the capitalized costs as a component of the cost of inventory produced each period. Under EITF 04-6, stripping costs are recorded directly as a component of the cost of inventory produced each period. Using an effective date of adoption of January 1, 2005, we recorded a decrease in capitalized mining costs of $226 million; an increase in the cost of inventory of $232 million; and a $6 million credit to earnings for the cumulative effect of this change. For 2005, the effect of adopting EITF 04-6 compared to the prior policy was an increase in net income of $44 million ($0.08 per share), excluding the cumulative effect on prior periods.
F Accounting Developments
FAS 157, Fair Value Measurements (FAS 157)
In September 2006, the FASB issued FAS 157 that provides enhanced guidance for using fair value to measure assets and liabilities. FAS 157 is meant to ensure that the measurement of fair value is more comparable and consistent, and improve disclosure about fair value measures. As a result of FAS 157, there is now a common definition of fair value to be used throughout US GAAP. FAS 157 applies whenever US GAAP requires (or permits) measurement of assets or liabilities at fair value. FAS 157 does not address when the use of fair value measurements is required.
In December 2007 the FASB issued FSP FAS 157-b, which provided a one year deferral until January 1, 2009 for the implementation of FAS 157 for non-financial assets and liabilities. The deferral is intended to provide the FASB additional time to consider the effects of various implementation issues that have arisen, or that may arise, from the application of FAS 157. Barrick is required to implement FAS 157 for financial assets
| BARRICK YEAR-END 2008 |
A-13 | NOTES TO FINANCIAL STATEMENTS |
and liabilities that are carried at fair value effective January 1, 2008. We do not expect the adoption of FAS 157 to have any significant impact on valuations of investments or derivative instruments.
FAS 159—The Fair Value Option for Financial Assets and Financial Liabilities (FAS 159)
In February 2007 the FASB issued FAS 159, which allows an irrevocable option, Fair Value Option (FVO), to carry eligible financial assets and liabilities at fair value, with the election made on an instrument-by-instrument basis. Changes in fair value for these instruments would be recorded in earnings. The objective of FAS 159 is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions.
Under FAS 159 an entity must elect whether to use the FVO on the date an item is initially recognized, with limited exceptions. Since the FVO is an instrument-by-instrument election, companies may record identical financial assets and liabilities either at fair value or on another measurement basis permitted by US GAAP, such as amortized cost. One exception to the instrument-by-instrument guidance is that for investments that would otherwise fall under equity method accounting, the election must be made for all of the investor’s financial interests (equity and debt, including guarantees) in the same entity.
FAS 159 will be effective for Barrick beginning in first quarter 2008 and must be applied prospectively. Barrick will not adopt the FVO on its eligible financial instruments, which include available-for-sale securities, equity method investments and long-term debt, existing as at January 1, 2008.
FAS 141(R), Business Combinations (FAS 141(R))
In December 2007 the FASB issued FAS 141(R), which will replace FAS 141 prospectively for business combinations consummated after the effective date of December 15, 2008. Early adoption is not permitted. Under FAS 141(R), business acquisitions will be accounted for under the “acquisition method”, compared to the “purchase method” mandated by FAS 141.
The more significant changes that will result from applying the acquisition method include: (i) the definition of a business is broadened to include development stage entities, and therefore more acquisitions will be accounted for as business combinations rather than asset acquisitions; (ii) the measurement date for equity interests issued by the acquirer is the acquisition date instead of a few days before and after terms are agreed to and announced, which may significantly change the amount recorded for the acquired business if share prices differ from the agreement and announcement date to the acquisition date; (iii) all future adjustments to income tax estimates will be recorded to income tax expense, whereas under FAS 141 certain changes in income tax estimates were recorded to goodwill; (iv) acquisition-related costs of the acquirer, including investment banking fees, legal fees, accounting fees, valuation fees, and other professional or consulting fees will be expensed as incurred, whereas under FAS 141 these costs are capitalized as part of the cost of the business combination; (v) the assets acquired and liabilities assumed are recorded at 100% of fair value even if less than 100% is obtained, whereas under FAS 141 only the controlling interest’s portion is recorded at fair value; and (vi) the non-controlling interest will be recorded at its share of fair value of net assets acquired, including its share of goodwill, whereas under FAS 141 the non-controlling interest is recorded at its share of carrying value of net assets acquired with no goodwill being allocated.
FAS 160, Non-controlling Interests in Consolidated Financial Statements (FAS 160)
In December 2007 the FASB issued FAS 160, which is effective for fiscal years beginning after December 15, 2008. Under FAS 160, non-controlling interests will be measured at 100% of the fair value of assets acquired and liabilities assumed. Under current standards, the non-controlling interest is measured at book value. For presentation and disclosure purposes, non-controlling interests will be classified as a separate component of shareholders’ equity. In addition, FAS 160 will change the manner in which increases/decreases in
| BARRICK YEAR-END 2008 |
A-14 | NOTES TO FINANCIAL STATEMENTS |
ownership percentages are accounted for. Changes in ownership percentages will be recorded as equity transactions and no gain or loss will be recognized as long as the parent retains control of the subsidiary. When a parent company deconsolidates a subsidiary but retains a non-controlling interest, the non-controlling interest is re-measured at fair value on the date control is lost and a gain or loss is recognized at that time. Under FAS 160, accumulated losses attributable to the non-controlling interests are no longer limited to the original carrying amount, and therefore non-controlling interests could have a negative carrying balance. The provisions of FAS 160 are to be applied prospectively with the exception of the presentation and disclosure provisions, which are to be applied for all prior periods presented in the financial statements. Early adoption is not permitted.
G Other Notes to the Financial Statements
| Note | Page | |||
| 3 | A-16 | |||
| 4 | A-22 | |||
| 5 | A-24 | |||
| 6 | A-26 | |||
| 7 | A-28 | |||
| 8 | A-29 | |||
| 9 | A-30 | |||
| 10 | A-32 | |||
| 11 | A-33 | |||
| 12 | A-34 | |||
| 13 | A-38 | |||
| 14 | A-40 | |||
| 15 | A-40 | |||
| 16 | A-44 | |||
| 17 | A-44 | |||
| 18 | A-46 | |||
| 19 | A-46 | |||
| 20 | A-46 | |||
| 21 | A-59 | |||
| 22 | A-60 | |||
| 23 | A-60 | |||
| 24 | A-64 | |||
| 25 | A-66 | |||
| 26 | A-66 | |||
| 27 | A-70 | |||
| 28 | A-75 | |||
| 29 | A-77 | |||
| BARRICK YEAR-END 2008 |
A-15 | NOTES TO FINANCIAL STATEMENTS |
3 > SIGNIFICANT ACQUISITIONS AND DIVESTITURES
| For the years ended December 31 |
2007 | 2006 | 2005 | ||||||
| Cash paid on acquisition1 |
|||||||||
| Arizona Star |
$ | 722 | $ | — | $ | — | |||
| Porgera (additional 20% interest) |
259 | — | — | ||||||
| Kainantu |
135 | — | — | ||||||
| Pioneer Metals |
6 | 48 | — | ||||||
| Placer Dome |
— | 160 | — | ||||||
| $ | 1,122 | $ | 208 | $ | — | ||||
| Cash proceeds on sale1 |
|||||||||
| Celtic2 |
21 | — | — | ||||||
| Paddington Mill3 |
30 | — | — | ||||||
| Grace Claim3 |
54 | — | — | ||||||
| $ | 105 | $ | — | $ | — | ||||
| Cash proceeds on sale of discontinued operations |
|||||||||
| South Deep mine |
$ | — | $ | 1,209 | $ | — | |||
| Operations sold to Goldcorp |
— | 1,619 | — | ||||||
| $ | — | $ | 2,828 | $ | — | ||||
| 1 | All amounts are presented net of cash acquired/divested. Potential deferred tax adjustments may arise from these acquisitions. |
| 2 | Included within investment sales in the Consolidated Statement of Cash Flow |
| 3 | Included within Property, Plant and Equipment sales in the Consolidated Statement of Cash flow |
A Acquisition of 40% Interest in Cortez
In February 2008, our subsidiary, Barrick Gold Finance Inc., entered into a definitive purchase agreement with Kennecott Explorations (Australia) Ltd., a subsidiary of Rio Tinto plc (“Rio Tinto”) to acquire its 40% interest in the Cortez property for $1.695 billion in cash consideration, due on closing, with a further $50 million payable if and when we add an additional 12 million ounces of contained gold resources to our December 31, 2007 reserve statement for Cortez. A sliding scale royalty is payable to Rio Tinto on 40% of all production in excess of 15 million ounces on and after January 1, 2008. The acquisition will consolidate 100% ownership for Barrick of the existing Cortez mine and the Cortez Hills development project plus any future potential from the property. We expect to fund the purchase price through a combination of our existing cash balances and by drawing down our line of credit. The agreement is subject to the normal and customary closing conditions and is expected to close in the first quarter of 2008.
B Acquisition of Arizona Star Resources Corporation (“Arizona Star”)
On December 19, 2007, we paid $722 million which reflects the purchase price net of cash acquired of $8 million, for 40.7 million common shares of Arizona Star. These shares represent 94% of the outstanding common shares of Arizona Star on a fully-diluted basis. It is our intention to acquire the remaining outstanding Arizona Star common shares by way of a compulsory acquisition. The Offer price for Arizona Star’s common shares was CDN$18.00. Arizona Star owns a 51% interest in the Cerro Casale deposit in the Maricunga district of Region III in Chile. The acquisition of Arizona Star has been accounted for as an asset purchase. The purchase price allocation will be finalized in 2008 with the determination of the deferred tax portion, if any.
| BARRICK YEAR-END 2008 |
A-16 | NOTES TO FINANCIAL STATEMENTS |
Purchase Cost
| Purchase cost per agreement |
$ | 728 | ||
| Purchase price adjustments and transaction costs |
2 | |||
| Less: cash acquired |
(8 | ) | ||
| $ | 722 | |||
Preliminary Purchase Price Allocation
| Equity investment in Cerro Casale project |
$ | 732 | |
| Total assets |
732 | ||
| Accounts payable |
8 | ||
| Non-controlling interest |
2 | ||
| Total liabilities |
10 | ||
| Net assets acquired |
$ | 722 | |
C Kainantu Acquisition
On December 12, 2007 we completed the acquisition of the Kainantu mineral property and various exploration licenses in Papua New Guinea from Highlands Pacific Limited for $135 million in cash, which reflects the purchase price, net of $7 million withheld pending certain permit renewals. The acquisition has been accounted for as a purchase of assets. The purchase price allocation will be finalized in 2008.
D Sale of Paddington Mill
In 2007, we completed the sale of the Paddington mill and associated land tenements in Australia to Norton Goldfields Limited and the sale of certain land tenements to Apex Minerals for total proceeds of $32 million, $30 million in cash and $2 million in Apex Minerals NL shares, respectively. We recorded a gain of $8 million in other income on closing.
E Porgera Mine Acquisition
In 2007, we completed the acquisition of an additional 20% interest in the Porgera mine in Papua New Guinea from Emperor Mines Limited, for cash consideration of $259 million. The acquisition has been accounted for as a business combination. Following this transaction our interest in the Porgera mine increased from 75% to 95%. The Government of Papua New Guinea holds the remaining 5% undivided interest in Porgera. We have entered into a call option deed regarding the possible sale of up to a 5% interest to the Government of Papua New Guinea, for the proportionate acquisition cost paid by Barrick.
Purchase Cost
| Purchase cost per agreement with Emperor Mines Limited |
$ | 250 | ||
| Purchase price adjustments and transaction costs |
14 | |||
| Less: cash acquired |
(5 | ) | ||
| $ | 259 | |||
| BARRICK YEAR-END 2008 |
A-17 | NOTES TO FINANCIAL STATEMENTS |
Summary Purchase Price Allocation
| Inventories |
$ | 17 | |
| Other current assets |
2 | ||
| Property, plant and equipment |
145 | ||
| Non-current ore in stockpiles |
60 | ||
| Deferred tax assets |
20 | ||
| Goodwill |
34 | ||
| Total assets |
278 | ||
| Current liabilities |
11 | ||
| Asset retirement obligations |
8 | ||
| Total liabilities |
19 | ||
| Net assets acquired |
$ | 259 | |
F Acquisition of Pioneer Metals Inc. (“Pioneer”)
In 2006, we acquired control of Pioneer through the acquisition of 59.2 million shares, representing approximately 91% of the outstanding shares of Pioneer, for cash consideration of $54 million. Pioneer had a portfolio of exploration properties and interests, including the Grace property which is adjacent to NovaGold Resources Inc.’s (“NovaGold”) Galore Creek project. In 2007, we acquired all of the remaining outstanding shares of Pioneer for cash consideration of $6 million and recorded purchase price adjustments totaling $3 million.
Purchase Cost
| Purchase cost |
$ | 63 | ||
| Less: cash acquired |
(9 | ) | ||
| $ | 54 | |||
The acquisition has been accounted for as a purchase of assets. The purchase price allocation was as follows:
Summary Purchase Price Allocation
| Property, plant and equipment |
69 | ||
| Total assets |
69 | ||
| Current liabilities |
— | ||
| Deferred tax liabilities |
15 | ||
| Total liabilities |
15 | ||
| Net assets acquired |
$ | 54 | |
In third quarter 2007 we sold the Grace property to NovaGold for cash proceeds of $54 million. There was no after-tax gain or loss arising on closing.
| BARRICK YEAR-END 2008 |
A-18 | NOTES TO FINANCIAL STATEMENTS |
G Acquisition of Placer Dome Inc. (“Placer Dome”)
In first quarter 2006 we acquired 100% of the outstanding common shares of Placer Dome. Placer Dome was one of the world’s largest gold mining companies. It had 12 mining operations based in North America, South America, Africa and Australia/Papua New Guinea, as well as four projects that are in various stages of exploration/development. Its most significant mines were Cortez in the United States, Zaldívar in Chile, Porgera in Papua New Guinea, North Mara in Tanzania and South Deep in South Africa. The most significant projects are Cortez Hills and Donlin Creek LLC (“Donlin Creek”) in the United States, and Pueblo Viejo in the Dominican Republic. The business combination between ourselves and Placer Dome was an opportunity to create a Canadian-based leader in the global gold mining industry, which strengthens our competitive position, including in respect of gold reserves, gold production, growth opportunities, and balance sheet strength.
Accounting for the Placer Dome Acquisition
The Placer Dome acquisition has been accounted for as a purchase business combination, with Barrick as the accounting acquirer. We acquired Placer Dome on January 20, 2006, with the results of operations of Placer Dome consolidated from January 20, 2006 onwards. The purchase cost was $10 billion and was funded through a combination of common shares issued, the drawdown of a $1 billion credit facility, and cash resources.
| Value of 322.8 million Barrick common shares issued at $27.14 per share1 |
$ | 8,761 | |
| Value of 2.7 million fully vested stock options |
22 | ||
| Cash |
1,239 | ||
| Transaction costs |
32 | ||
| $ | 10,054 | ||
| 1 | The measurement of the common share component of the purchase consideration represents the average closing price on the New York Stock Exchange for the two days prior to and two days after the public announcement on December 22, 2005 of our final offer for Placer Dome. |
In accordance with the purchase method of accounting, the purchase cost was allocated to the underlying assets acquired and liabilities assumed based primarily upon their estimated fair values at the date of acquisition. The estimated fair values were based on a combination of independent appraisals and internal estimates. The excess of purchase cost over the net identifiable tangible and intangible assets acquired represents goodwill. Goodwill arising on the acquisition of Placer Dome principally represents the ability for the company to continue as a going concern by finding new mineral reserves as well as the value of synergies that we expect to realize as a direct consequence of the acquisition of Placer Dome. Details of the allocation of goodwill arising on acquisition are included in note 17.
On the acquisition of Placer Dome in first quarter 2006, we completed a preliminary purchase price allocation for assets and liabilities acquired. Amortization expense for the first three quarters of 2006 was based on this preliminary purchase price allocation. In fourth quarter 2006, we completed final purchase price allocations and updated our calculations of amortization expense prospectively. The effect of the final purchase price allocation on the amount of amortization expense recorded in 2007 compared to amounts recorded in 2006 based on the preliminary allocation, was an increase of $189 million.
| BARRICK YEAR-END 2008 |
A-19 | NOTES TO FINANCIAL STATEMENTS |
The principal valuation methods for major classes of assets and liabilities were:
| Inventory | Finished goods and work in process valued at estimated selling prices less disposal costs, costs to complete and a reasonable profit allowance for the completing and selling effort. | |
| Building and equipment | Reproduction and/or replacement cost or market value for current function and service potential, adjusted for physical, functional and economic obsolescence. | |
| Proven and probable reserves and value beyond proven and probable reserves at producing mines |
Multi-period excess earnings approach considering the prospective level of cash flows and fair value of other assets at each mine. | |
| Development projects | Discounted future cash flows considering the prospective level of cash flows from future operations and necessary capital cost expenditures. | |
| Exploration properties | Appraised values considering costs incurred, earn-in agreements and comparable market transactions, where applicable. | |
| Long-term debt and derivative instruments | Estimated fair values consistent with the methods disclosed in note 20C. | |
| Asset retirement obligations | Estimated fair values consistent with the methods disclosed in note 21. | |
Final Summary Purchase Price Allocation
| Cash |
$ | 1,102 | |
| Inventories |
428 | ||
| Other current assets |
198 | ||
| Property, plant and equipment |
|||
| Buildings, plant and equipment |
2,946 | ||
| Proven and probable reserves |
1,571 | ||
| Value beyond proven and probable reserves |
419 | ||
| Intangible assets |
85 | ||
| Assets of discontinued operations1 |
1,744 | ||
| Deferred tax assets |
93 | ||
| Other assets |
254 | ||
| Goodwill |
6,506 | ||
| Total assets |
15,346 | ||
| Current liabilities |
669 | ||
| Liabilities of discontinued operations1 |
107 | ||
| Derivative instrument liabilities |
1,729 | ||
| Long-term debt |
1,252 | ||
| Asset retirement obligations |
387 | ||
| Deferred income tax liabilities |
686 | ||
| Total liabilities |
4,830 | ||
| Non-controlling interests |
462 | ||
| Net assets acquired |
$ | 10,054 | |
| 1 | Includes operations that were sold to Goldcorp Inc. |
| BARRICK YEAR-END 2008 |
A-20 | NOTES TO FINANCIAL STATEMENTS |
At acquisition we recorded liabilities totaling $48 million that primarily relate to employee severance at Placer Dome offices that were closed during the year. All amounts were settled by the end of 2007.
H Discontinued Operations
Results of Discontinued Operations
| For the years ended Dec.31 |
2007 | 2006 | 2005 | ||||||
| Gold sales |
|||||||||
| South Deep operations |
$ | — | $ | 158 | $ | — | |||
| Operations sold to Goldcorp |
— | 83 | — | ||||||
| $ | — | $ | 241 | $ | — | ||||
| Income before tax |
|||||||||
| South Deep |
9 | 8 | — | ||||||
| Gain on sale of South Deep |
— | 288 | |||||||
| Operations sold to Goldcorp |
— | 1 | — | ||||||
| $ | 9 | $ | 297 | $ | — | ||||
South Deep
On December 1, 2006, we sold our 50% interest in the South Deep mine in South Africa to Gold Fields Limited (“Gold Fields”). The consideration on closing was $1,517 million, of which $1,209 million was received in cash and $308 million in Gold Fields shares. On closing we recorded a gain of $288 million, representing the consideration received less transaction costs and the carrying amount of net assets of South Deep, including goodwill relating to South Deep of $651 million.
The results of the operations of South Deep in 2006 are presented under “discontinued operations” in the income statement and cash flow statement. As required by accounting rules applicable to discontinued operations, amortization of property, plant and equipment at South Deep ceased on September 1, 2006, the date when they were classified as held for sale, and we allocated interest expense of $2 million to these discontinued operations.
In second quarter 2006, a loaded skip and 6.7 kilometers of rope fell 1.6 kilometers down the South Deep mine’s Twin Shaft complex during routine maintenance, causing extensive damage but no injuries. Repair costs for assets that were damaged were expensed as incurred. We were insured for property damage and a portion of business interruption losses. In fourth quarter 2006 we recorded a receivable for insurance recoveries of $12 million related to this incident. In second quarter 2007, a final settlement was reached with Gold Fields on the allocation of insurance proceeds and, as a result, we recorded further proceeds of $9 million within income from discontinued operations. During the third quarter, $21 million was received in cash and has been classified under Cash Flows of Discontinued Operations in our Consolidated Statement of Cash Flows.
Operations Sold to Goldcorp
In second quarter 2006, we sold all of Placer Dome’s Canadian properties and operations (other than Placer Dome’s office in Vancouver), including all mining, reclamation and exploration properties, Placer Dome’s interest in the La Coipa mine in Chile, 40% of Placer Dome’s interest in the Pueblo Viejo project in the Dominican Republic, certain related assets and, our share in Agua de la Falda S.A., which included our interest in the Jeronimo project, to Goldcorp Inc. (“Goldcorp”) (collectively, the “Operations sold to Goldcorp”). Goldcorp is responsible for all liabilities relating solely to these properties and operations, including employment commitments and environmental, closure and reclamation liabilities.
| BARRICK YEAR-END 2008 |
A-21 | NOTES TO FINANCIAL STATEMENTS |
The sales proceeds for the operations sold to Goldcorp were $1,641 million. The aggregate net amount of assets and liabilities of these operations were recorded in the purchase price allocation at $1,641 million based on the terms of the sale agreement with Goldcorp that was in place at the time we acquired Placer Dome. The results of the operations sold to Goldcorp were included under “discontinued operations” in the income statement and cash flow statement until closing. Interest expense of $21 million was allocated to the results from the operations sold to Goldcorp. No gain or loss arose on closing of the sale.
Income Statement Information
| Sales | Segment cost of sales | Segment income1 | |||||||||||||||||||||||||
| For the years ended December 31 |
2007 | 2006 | 2005 | 2007 | 2006 | 2005 | 2007 | 2006 | 2005 | ||||||||||||||||||
| Gold |
|||||||||||||||||||||||||||
| North America |
$ | 2,001 | $ | 1,791 | $ | 1,247 | $ | 1,194 | $ | 1,052 | $ | 693 | $ | 493 | $ | 492 | $ | 341 | |||||||||
| South America |
1,306 | 1,131 | 506 | 408 | 311 | 137 | 664 | 693 | 268 | ||||||||||||||||||
| Australia Pacific |
1,292 | 1,144 | 411 | 945 | 757 | 260 | 108 | 201 | 105 | ||||||||||||||||||
| Africa |
428 | 427 | 184 | 295 | 228 | 108 | 55 | 111 | 27 | ||||||||||||||||||
| Copper |
|||||||||||||||||||||||||||
| South America |
1,065 | 955 | — | 233 | 283 | — | 752 | 621 | — | ||||||||||||||||||
| Australia Pacific |
240 | 182 | — | 109 | 110 | — | 92 | 55 | — | ||||||||||||||||||
| $ | 6,332 | $ | 5,630 | $ | 2,348 | $ | 3,184 | $ | 2,741 | $ | 1,198 | $ | 2,164 | $ | 2,173 | $ | 741 | ||||||||||
| 1 | Segment income represents segment sales, less cost of sales and amortization. |
Income Statement Information (cont’d)
| Exploration1 | Regional business unit costs1 | |||||||||||||||||
| For the years ended December 31 |
2007 | 2006 | 2005 | 2007 | 2006 | 2005 | ||||||||||||
| North America |
$ | 70 | $ | 64 | $ | 34 | $ | 27 | $ | 32 | $ | 16 | ||||||
| South America |
40 | 22 | 19 | 23 | 19 | 6 | ||||||||||||
| Australia Pacific |
46 | 44 | 13 | 38 | 38 | 16 | ||||||||||||
| Africa |
15 | 22 | 34 | 11 | 1 | — | ||||||||||||
| Other expenses outside reportable segments |
8 | 19 | 9 | — | — | — | ||||||||||||
| $ | 179 | $ | 171 | $ | 109 | $ | 99 | $ | 90 | $ | 38 | |||||||
| 1 | Exploration and regional business unit costs are excluded from the measure of segment income but are reported separately by operating segment to the Chief Operating Decision Maker. |
| BARRICK YEAR-END 2008 |
A-22 | NOTES TO FINANCIAL STATEMENTS |
Geographic Information
| Long-lived assets1 | Sales2 | |||||||||||||||||
| For the years ended Dec.31 |
2007 | 2006 | 2005 | 2007 | 2006 | 2005 | ||||||||||||
| North America |
||||||||||||||||||
| United States |
$ | 2,638 | $ | 2,518 | $ | 1,431 | $ | 1,882 | $ | 1,702 | $ | 1,068 | ||||||
| Canada |
1,528 | 976 | 313 | 119 | 89 | 179 | ||||||||||||
| Dominican Republic |
139 | 78 | — | — | — | — | ||||||||||||
| South America |
||||||||||||||||||
| Peru |
392 | 492 | 540 | 1,033 | 878 | 506 | ||||||||||||
| Chile |
1,764 | 1,599 | 269 | 1,065 | 955 | — | ||||||||||||
| Argentina |
1,048 | 1,014 | 843 | 273 | 253 | — | ||||||||||||
| Australia Pacific |
||||||||||||||||||
| Australia |
1,724 | 2,142 | 815 | 1,250 | 1,116 | 411 | ||||||||||||
| Papua New Guinea |
702 | 438 | — | 282 | 210 | — | ||||||||||||
| Africa |
||||||||||||||||||
| Tanzania |
1,336 | 993 | 669 | 428 | 427 | 184 | ||||||||||||
| Other |
477 | 534 | 301 | — | — | — | ||||||||||||
| $ | 11,748 | $ | 10,784 | $ | 5,181 | $ | 6,332 | $ | 5,630 | $ | 2,348 | |||||||
| 1 | Long-lived assets include property, plant and equipment and other tangible non-current assets. |
| 2 | Presented based on the location in which the sale originated. |
Reconciliation of Segment Income to Income from Continuing Operations Before Income Taxes and Other Items
| For the years ended Dec.31 |
2007 | 2006 | 2005 | |||||||||
| Segment income |
$ | 2,164 | $ | 2,173 | $ | 741 | ||||||
| Amortization of corporate assets |
(20 | ) | (19 | ) | (18 | ) | ||||||
| Exploration |
(179 | ) | (171 | ) | (109 | ) | ||||||
| Project development expense |
(188 | ) | (119 | ) | (32 | ) | ||||||
| Corporate administration |
(155 | ) | (142 | ) | (71 | ) | ||||||
| Other expenses |
(208 | ) | (216 | ) | (114 | ) | ||||||
| Impairment charges1 |
(65 | ) | (23 | ) | (16 | ) | ||||||
| Interest income |
141 | 110 | 38 | |||||||||
| Interest expense |
(113 | ) | (126 | ) | (3 | ) | ||||||
| Other income |
103 | 93 | 46 | |||||||||
| Income from continuing operations before income taxes and other items |
$ | 1,480 | $ | 1,560 | $ | 462 | ||||||
| 1 | In 2007, impairment charges include $42 million of goodwill impairments in the North America region. |
| BARRICK YEAR-END 2008 |
A-23 | NOTES TO FINANCIAL STATEMENTS |
Asset Information
| Segment long-lived assets | Amortization | Segment capital expenditures1 | |||||||||||||||||||||||||
| For the years ended Dec.31 |
2007 | 2006 | 2005 | 2007 | 2006 | 2005 | 2007 | 2006 | 2005 | ||||||||||||||||||
| Gold |
|||||||||||||||||||||||||||
| North America |
$ | 4,305 | $ | 3,572 | $ | 1,744 | $ | 314 | $ | 247 | $ | 213 | $ | 236 | $ | 226 | $ | 218 | |||||||||
| South America |
1,922 | 1,829 | 1,652 | 234 | 127 | 101 | 343 | 343 | 525 | ||||||||||||||||||
| Australia Pacific |
2,310 | 2,434 | 815 | 239 | 186 | 46 | 208 | 313 | 308 | ||||||||||||||||||
| Africa |
1,336 | 993 | 669 | 78 | 88 | 49 | 240 | 93 | 45 | ||||||||||||||||||
| Copper |
|||||||||||||||||||||||||||
| South America |
1,282 | 1,276 | — | 80 | 51 | — | 27 | 17 | — | ||||||||||||||||||
| Australia Pacific |
116 | 146 | — | 39 | 17 | — | 11 | 22 | — | ||||||||||||||||||
| Segment total |
11,271 | 10,250 | 4,880 | 984 | 716 | 409 | 1,065 | 1,014 | 1,096 | ||||||||||||||||||
| Cash and equivalents |
2,207 | 3,043 | 1,037 | — | — | — | — | — | — | ||||||||||||||||||
| Other current assets |
2,081 | 1,753 | 711 | — | — | — | — | — | — | ||||||||||||||||||
| Intangible assets |
68 | 75 | — | — | — | — | — | — | — | ||||||||||||||||||
| Goodwill |
5,847 | 5,855 | — | — | — | — | — | — | — | ||||||||||||||||||
| Other items not allocated to segments |
477 | 534 | 301 | 20 | 19 | 18 | 25 | 17 | 8 | ||||||||||||||||||
| Enterprise total |
$ | 21,951 | $ | 21,510 | $ | 6,929 | $ | 1,004 | $ | 735 | $ | 427 | $ | 1,090 | $ | 1,031 | $ | 1,104 | |||||||||
| 1 | Segment capital expenditures are presented on an accrual basis. Capital expenditures in the Consolidated Statements of Cash Flows are presented on a cash basis. In 2007, cash expenditures were $1,046 million (2006: $1,087 million; 2005: $1,104 million) and the increase in accrued expenditures were $44 million (2006: $(56) million; 2005: nil). |
5 > REVENUE AND GOLD SALES CONTRACTS
| For the years ended Dec.31 |
2007 | 2006 | 2005 | ||||||
| Gold bullion sales1 |
|||||||||
| Spot market sales |
$ | 3,823 | $ | 3,957 | $ | 1,938 | |||
| Gold sales contracts |
1,026 | 369 | 300 | ||||||
| 4,849 | 4,326 | 2,238 | |||||||
| Concentrate sales2 |
178 | 167 | 110 | ||||||
| $ | 5,027 | $ | 4,493 | $ | 2,348 | ||||
| Copper sales1,3 |
|||||||||
| Copper cathode sales |
$ | 1,063 | $ | 937 | $ | — | |||
| Concentrate sales |
242 | 200 | — | ||||||
| $ | 1,305 | $ | 1,137 | $ | — | ||||
| 1 | Revenues include amounts transferred from OCI to earnings for commodity cash flow hedges (see note 20C and 25). |
| 2 | Gold sales include gains and losses on gold derivative contracts which have been economically offset, but not yet settled, and on embedded derivatives in smelting contracts: 2007: $4 million loss (2006: $4 million gain; 2005: $3 million gain). |
| 3 | Copper sales include gains and losses on economic copper hedges that do not qualify for hedge accounting treatment and on embedded derivatives in copper smelting contracts: 2007: $53 million gain (2006: $14 million loss; 2005: $nil). |
| BARRICK YEAR-END 2008 |
A-24 | NOTES TO FINANCIAL STATEMENTS |
Principal Products
All of our gold mining operations produce gold in doré form, except Eskay Creek, which produces gold concentrate and gold doré; Bulyanhulu which produces both gold doré and gold concentrate; and Osborne which produces a concentrate that contains both gold and copper. Gold doré is unrefined gold bullion bars usually consisting of 90% gold that is refined to pure gold bullion prior to sale to our customers. Gold concentrate is a processing product containing the valuable ore mineral (gold) from which most of the waste mineral has been eliminated, that undergoes a smelting process to convert it into gold bullion. Gold bullion is sold primarily in the London spot market or under gold sales contracts. Gold concentrate is sold to third-party smelters. At our Zaldívar mine we produce pure copper cathode, which consists of 99.9% copper, a form that is deliverable for sale in world metals exchanges.
Revenue Recognition
We record revenue when the following conditions are met: persuasive evidence of an arrangement exists; delivery and transfer of title (gold revenue only) have occurred under the terms of the arrangement; the price is fixed or determinable; and collectability is reasonably assured. Revenue in 2007 is presented net of direct sales taxes of $15 million (2006: $16 million; 2005: $nil).
Gold Bullion Sales
We record revenue from gold and silver bullion sales at the time of physical delivery, which is also the date that title to the gold or silver passes. The sales price is fixed at the delivery date based on either the terms of gold sales contracts or the gold spot price. Incidental revenues from the sale of by-products such as silver are classified within cost of sales.
Gold Sales Contracts
At December 31, 2006, we had 2.5 million ounces of Corporate Gold Sales Contracts. We delivered 2.5 million ounces into the Corporate Gold Sales Contracts at an average price of $404 per ounce in the first half of 2007. At December 31, 2007, there were no remaining Corporate Gold Sales Contracts. At December 31, 2007, we had Project Gold Sales Contracts with various customers for a total of 9.5 million ounces of future gold production of which 1.7 million ounces are at floating spot prices.
The terms of gold sales contracts are governed by master trading agreements (MTAs) that we have in place with customers. The contracts have final delivery dates primarily over the next 10 years, but we have the right to settle these contracts at any time over this period. Contract prices are established at inception through to an interim date. If we do not deliver at this interim date, a new interim date is set. The price for the new interim date is determined in accordance with the MTAs which have contractually agreed price adjustment mechanisms based on the market gold price. The MTAs have both fixed and floating price mechanisms. The fixed-price mechanism represents the market price at the start date (or previous interim date) of the contract plus a premium based on the difference between the forward price of gold and the current market price. If at an interim date we opt for a floating price, the floating price represents the spot market price at the time of delivery of gold adjusted based on the difference between the previously fixed price and the market gold price at that interim date. The final realized selling price under a contract primarily depends upon the timing of the actual future delivery date, the market price of gold at the start of the contract and the actual amount of the premium of the forward price of gold over the spot price of gold for the periods that fixed selling prices are set.
Mark-to-Market Value
| $ millions |
Total ounces in millions |
At Dec.31, 2007 value1 |
||||
| Project Gold Sales Contracts |
9.5 | $ | (4,626 | ) | ||
| 1 | At a spot gold price of $834 per ounce. |
| BARRICK YEAR-END 2008 |
A-25 | NOTES TO FINANCIAL STATEMENTS |
Concentrate Sales
Under the terms of concentrate sales contracts with independent smelting companies, gold and copper sales prices are set on a specified future date after shipment based on market prices. We record revenues under these contracts at the time of shipment, which is also when title passes to the smelting companies, using forward market gold and copper prices on the expected date that final sales prices will be fixed. Variations between the price recorded at the shipment date and the actual final price set under the smelting contracts are caused by changes in market gold and copper prices, and result in an embedded derivative in the accounts receivable. The embedded derivative is recorded at fair value each period until final settlement occurs, with changes in fair value classified as a component of revenue. The notional amount outstanding in accounts receivable is typically between ten and fifteen thousand ounces of gold and four and seven million pounds of copper.
Copper Cathode Sales
Under the terms of copper cathode sales contracts, copper sales prices are set on a specified future date based upon market commodity prices plus certain price adjustments. Revenue is recognized at the time of shipment when risk of loss passes to the customer, and collectability is reasonably assured. Revenue is measured using forward market prices on the expected date that final selling prices will be fixed. Variations occur between the price recorded on the date of revenue recognition and the actual final price under the terms of the contracts due to changes in market copper prices, which result in the existence of an embedded derivative in the accounts receivable. This embedded derivative is recorded at fair value each period until final settlement occurs, with changes in fair value classified as a component of revenue. The notional amount outstanding in accounts receivable is between twenty and thirty million pounds of copper.
| Gold | Copper | ||||||||||||||||||||||
| For the years ended Dec.31 |
2007 | 2006 | 2005 | 2007 | 2006 | 2005 | |||||||||||||||||
| Cost of goods sold1 |
$ | 2,757 | $ | 2,294 | $ | 1,249 | $ | 337 | $ | 390 | $ | — | |||||||||||
| By-product revenues2,3 |
(105 | ) | (123 | ) | (132 | ) | (2 | ) | (1 | ) | — | ||||||||||||
| Royalty expense |
161 | 150 | 63 | 7 | 4 | — | |||||||||||||||||
| Mining production taxes |
29 | 27 | 18 | — | — | — | |||||||||||||||||
| $ | 2,842 | $ | 2,348 | $ | 1,198 | $ | 342 | $ | 393 | $ | — | ||||||||||||
| 1 | Cost of goods sold includes accretion expense at producing mines of $40 million (2006: $31 million; 2005: $11 million). Cost of goods sold includes charges to reduce the cost of inventory to net realizable value as follows: $13 million in 2007; $28 million in 2006 and $15 million in 2005. The cost of inventory sold in the period reflects all components capitalized to inventory, except that, for presentation purposes, the component of inventory cost relating to amortization of property, plant and equipment is classified in the income statement under “amortization”. Some companies present this amount under “cost of sales”. The amount presented in amortization rather than cost of sales was $984 million in 2007; $716 million in 2006 and $409 million in 2005. |
| 2 | We use silver sales contracts to sell a portion of silver produced as a by-product. Silver sales contracts have similar delivery terms and pricing mechanisms as gold sales contracts. At December 31, 2007, we had sales contract commitments to deliver 18.2 million ounces of silver over periods up to 10 years. The mark-to-market on silver sales contracts at December 31, 2007 was negative $111 million (2006: negative $100 million; 2005: $52 million). |
| 3 | By-product credits include gains and losses on economic silver hedges that do not qualify for hedge accounting treatment: 2007: $nil (2006: $5 million loss; 2005: $nil). |
| BARRICK YEAR-END 2008 |
A-26 | NOTES TO FINANCIAL STATEMENTS |
Royalties
Certain of our properties are subject to royalty arrangements based on mineral production at the properties. The most significant royalties are at the Goldstrike, Bulyanhulu and Veladero mines and the Pascua-Lama project. The primary type of royalty is a net smelter return (NSR) royalty. Under this type of royalty we pay the holder an amount calculated as the royalty percentage multiplied by the value of gold production at market gold prices less third-party smelting, refining and transportation costs. Other types of royalties include:
| • | Net profits interest (NPI) royalty, |
| • | Net smelter return sliding scale (NSRSS) royalty, |
| • | Gross proceeds sliding scale (GPSS) royalty, |
| • | Gross smelter return (GSR) royalty, |
| • | Net value (NV) royalty, and a |
| • | Land tenement (LT) royalty |
Royalty expense is recorded at the time of sale of gold production, measured using the applicable royalty percentage for NSR royalties or estimates of NPI amounts.
| Producing mines |
Type of royalty | |
| North America |
||
| Goldstrike |
0%-5% NSR, 0%-6% NPI | |
| Eskay Creek |
1% NSR | |
| Williams |
1.5% NSR, 0.5% NV, 1% NV | |
| David Bell |
3% NSR | |
| Round Mountain |
3.53%-6.35% NSRSS | |
| Bald Mountain |
3.5%-4% NSR | |
| Ruby Hill |
3% modified NSR | |
| Cortez |
1.5% GSR | |
| Cortez—Pipeline/South Pipeline deposit |
0.4%-5% GSR | |
| Cortez—portion of Pipeline/South Pipeline deposit |
5% NV | |
| South America |
||
| Veladero |
3.75% modified NSR | |
| Lagunas Norte |
2.51% NSR | |
| Australia |
||
| Porgera |
2% NSR | |
| Queensland and Western Australia production |
2.5%-2.7% of gold revenue | |
| Africa |
||
| Bulyanhulu |
3% NSR | |
| North Mara |
3% NSR | |
| North Mara—Gokona pit |
3% NSR, 1.1% LT |
| BARRICK YEAR-END 2008 |
A-27 | NOTES TO FINANCIAL STATEMENTS |
7 > EXPLORATION AND PROJECT DEVELOPMENT EXPENSE
| For the years ended Dec. 31 |
2007 | 2006 | 2005 | ||||||
| Exploration: |
|||||||||
| Minesite exploration |
$ | 63 | $ | 54 | $ | 27 | |||
| Projects |
116 | 117 | 82 | ||||||
| $ | 179 | $ | 171 | $ | 109 | ||||
| Project development expense: |
|||||||||
| Pueblo Viejo1 |
67 | 25 | — | ||||||
| Donlin Creek2 |
32 | 37 | — | ||||||
| Sedibelo |
22 | 10 | — | ||||||
| Fedorova |
18 | — | — | ||||||
| Buzwagi |
5 | 12 | 5 | ||||||
| Pascua-Lama |
12 | 8 | 7 | ||||||
| Cowal3 |
— | 1 | 9 | ||||||
| Other |
32 | 26 | 11 | ||||||
| $ | 188 | $ | 119 | $ | 32 | ||||
| 1 | Represents 100% of project expenditures. We record a non-controlling interest credit for our partner’s share of expenditures within “non-controlling interests” in the income statement. |
| 2 | Amounts for 2007 include a recovery of $64 million of cumulative project costs from our partner. See note 12 for further details. |
| 3 | The Cowal mine began production in second quarter 2006. |
Accounting Policy
We capitalize costs incurred at projects that meet the definition of an asset after mineralization is classified as proven and probable gold reserves (as defined by United States reporting standards). Before classifying mineralization as proven and probable reserves, costs incurred at projects are considered project development expenses that are expensed as incurred. Project costs include: drilling costs; costs to prepare engineering scoping and feasibility studies; metallurgical testing; permitting; and sample mining. The cost of start-up activities at mines and projects such as recruiting and training are also expensed as incurred within project development expense. Drilling costs incurred at our operating mines are expensed as incurred as mine site exploration expense, unless we can conclude with a high degree of confidence, prior to the commencement of a drilling program, that the drilling costs will result in the conversion of a mineral resource into a proven and probable reserve. Our assessment of confidence is based on the following factors: results from previous drill programs; results from geological models; results from a mine scoping study confirming economic viability of the resource; and preliminary estimates of mine inventory, ore grade, cash flow and mine life. The costs of a drilling program that meets our highly confident threshold are capitalized as mine development costs.
The Pueblo Viejo, Donlin Creek, Sedibelo, and Fedorova projects are in various stages and none of the projects had met the criteria for cost capitalization at December 31, 2007. The Reko Diq project is owned through an equity investee and project expenses are included in “equity investees” in the income statement (see note 12).
Effective May 1, 2007, we determined that mineralization at Buzwagi met the definition of proven and probable reserves for United States reporting purposes. Following this determination, we began capitalizing costs that meet the definition of an asset at Buzwagi.
Funding of our partner’s share of ongoing project expenses for Donlin Creek, which is recoverable from the other partner, is shown under loans issued to joint venture partners under investing activities in the cash flow statement.
| BARRICK YEAR-END 2008 |
A-28 | NOTES TO FINANCIAL STATEMENTS |
A Other Expenses
| For the years ended Dec.31 |
2007 | 2006 | 2005 | ||||||
| Regional business unit costs1 |
$ | 99 | $ | 90 | $ | 38 | |||
| Community development costs2 |
28 | 15 | — | ||||||
| Environmental costs |
15 | 11 | 17 | ||||||
| World Gold Council fees |
12 | 13 | 10 | ||||||
| Changes in estimate of AROs at closed mines3 |
6 | 53 | 15 | ||||||
| Accretion expense at closed mines (note 21) |
10 | 8 | 10 | ||||||
| Non-hedge derivative losses (note 20C) |
8 | — | 12 | ||||||
| Currency translation losses |
1 | — | — | ||||||
| Pension and other post-retirement benefit expense (notes 27B and 27E)4 |
5 | 3 | 8 | ||||||
| Other items |
24 | 23 | 4 | ||||||
| $ | 208 | $ | 216 | $ | 114 | ||||
| 1 | Relates to costs incurred at regional business unit offices. |
| 2 | In 2007, amounts relate to community programs in Peru, Tanzania and Papua New Guinea. In 2006, amounts related to community programs in Peru and Tanzania. |
| 3 | In 2006, amount relates to change in estimate of the ARO at the Nickel Plate property In British Columbia, Canada. |
| 4 | For the year ended December 31, 2007, $nil million of pension credit that relates to active employees at producing mines is included in cost of sales (2006: $4 million; 2005: $nil), and $nil million is included in corporate administration (2006: $2 million; 2005: $nil). |
Environmental Costs
During the production phases of a mine, we incur and expense the cost of various activities connected with environmental aspects of normal operations, including compliance with and monitoring of environmental regulations; disposal of hazardous waste produced from normal operations; and operation of equipment designed to reduce or eliminate environmental effects. In limited circumstances, costs to acquire and install plant and equipment are capitalized during the production phase of a mine if the costs are expected to mitigate risk or prevent future environmental contamination from normal operations.
When a contingent loss arises from the improper use of an asset, a loss accrual is recorded if the loss is probable and reasonably estimable. Amounts recorded are measured on an undiscounted basis, and adjusted as further information develops or if circumstances change. Recoveries of environmental remediation costs from other parties are recorded as assets when receipt is deemed probable.
B Impairment Charges
| For the years ended Dec.31 |
2007 | 2006 | 2005 | ||||||
| Impairment of goodwill (note 17) 1 |
$ | 42 | $ | — | $ | — | |||
| Impairment charges on investments (note 12) 2 |
23 | 6 | 16 | ||||||
| Impairment of long-lived assets3 |
— | 17 | — | ||||||
| $ | 65 | $ | 23 | $ | 16 | ||||
| 1 | In 2007, the carrying amounts of Eskay Creek and Golden Sunlight were tested for impairment as part of the annual goodwill impairment test. Impairment charges of $7 million and $35 million respectively, were recorded to reduce the carrying amount for goodwill to its implied fair value. |
| BARRICK YEAR-END 2008 |
A-29 | NOTES TO FINANCIAL STATEMENTS |
| 2 | In 2007, we recorded an impairment charge on Asset Backed Commercial Paper of $20 million. |
| 3 | In 2006, the carrying amount of Cuerpo Sur, an extension of Pierina, was tested for impairment on completion of the annual life of mine planning process. An impairment charge of $17 million was recorded to reduce the carrying amount to the estimated fair value. |
C Other Income
| For the years ended Dec.31 |
2007 | 2006 | 2005 | ||||||
| Non-hedge derivative gains (note 20C) |
$ | — | $ | 2 | $ | — | |||
| Currency translation gains |
— | 2 | 3 | ||||||
| Gains on sale of assets1 |
2 | 9 | 5 | ||||||
| Gains on sale of investments (note 12) |
71 | 6 | 17 | ||||||
| Gain on vend-in to Highland Gold (note 12) |
— | 51 | — | ||||||
| Royalty income |
17 | 10 | 6 | ||||||
| Sale of water rights |
5 | 5 | — | ||||||
| Other |
8 | 8 | 15 | ||||||
| $ | 103 | $ | 93 | $ | 46 | ||||
| 1 | In 2007, we sold certain properties in South America and Australia, including an $8 million gain on the sale of the Paddington Mill. In 2006, we sold certain properties in Canada and Chile. In 2005, we sold some land positions in Australia. |
| For the years ended Dec.31 |
2007 | 2006 | 2005 | |||||||||
| Current |
||||||||||||
| Canada |
$ | (3 | ) | $ | 13 | $ | (3 | ) | ||||
| International |
518 | 444 | 93 | |||||||||
| $ | 515 | $ | 457 | $ | 90 | |||||||
| Deferred |
||||||||||||
| Canada |
$ | 19 | $ | (131 | ) | $ | (6 | ) | ||||
| International |
(25 | ) | 46 | (8 | ) | |||||||
| $ | (6 | ) | $ | (85 | ) | $ | (14 | ) | ||||
| Income tax expense before elements below |
$ | 509 | $ | 372 | $ | 76 | ||||||
| Net currency translation gains on deferred tax balances |
(76 | ) | (5 | ) | (11 | ) | ||||||
| Canadian tax rate changes |
64 | 12 | — | |||||||||
| Change in tax status in Australia |
— | (31 | ) | (5 | ) | |||||||
| Release of end of year valuation allowances—Tanzania |
(156 | ) | — | — | ||||||||
| Total expense |
$ | 341 | $ | 348 | $ | 60 | ||||||
Currency Translation
Deferred tax balances are subject to remeasurement for changes in currency exchange rates each period. The most significant balances are Canadian deferred tax assets with a carrying amount of approximately $439 million and Australian deferred tax liabilities with a carrying amount of approximately $95 million. In 2007, the appreciation of the Canadian and Australian dollar against the US dollar resulted in net translation gains arising totaling $76 million. These gains are included within deferred tax expense/recovery.
| BARRICK YEAR-END 2008 |
A-30 | NOTES TO FINANCIAL STATEMENTS |
Canadian Tax Rate Changes
In the second and fourth quarters of 2007 and the second quarter of 2006, federal rate changes were enacted in Canada that lowered the applicable tax rate. The impact of this tax rate change was to reduce net deferred tax assets in Canada by $64 million in 2007 and $35 million in 2006 that was recorded as a component of deferred income tax expense. Also in second quarter 2006, on change of tax status of a Canadian subsidiary, we recorded a deferred income tax credit of $23 million to reflect the impact on the measurement of deferred income tax assets and liabilities.
Change in Tax Status in Australia
In first quarter 2006, an interpretative decision (“ID”) was issued by the Australia Tax Office that clarified the tax treatment of currency gains and losses on foreign denominated liabilities. Under certain conditions, for taxpayers who have made the functional currency election, and in respect of debt that existed at the time the election was made, the ID provided clarification that unrealized foreign exchange gains that currently exist on intercompany debt will not crystallize upon repayment of the debt. The effect of the ID was recorded as a $31 million reduction of deferred tax liabilities.
Release of Tanzanian Valuation Allowances
In 2007, we released $156 million of end of year deferred tax valuation allowances in Tanzania due to the impact of higher market gold prices.
Reconciliation to Canadian Statutory Rate
| For the years ended Dec.31 |
2007 | 2006 | 2005 | |||||||||
| At 36.12% (2006 36.12% and 2005: 38%) statutory rate |
$ | 535 | $ | 563 | $ | 176 | ||||||
| Increase (decrease) due to: |
||||||||||||
| Allowances and special tax deductions1 |
(99 | ) | (55 | ) | (92 | ) | ||||||
| Impact of foreign tax rates2 |
38 | (131 | ) | (54 | ) | |||||||
| Expenses not tax-deductible |
63 | 20 | 9 | |||||||||
| Net currency translation gains on deferred tax balances |
(76 | ) | (5 | ) | (11 | ) | ||||||
| Release of end of year valuation allowances—Tanzania |
(156 | ) | — | — | ||||||||
| Release of valuation allowances—Other |
(88 | ) | (53 | ) | (32 | ) | ||||||
| Valuation allowances set up against current year tax losses |
5 | 7 | 59 | |||||||||
| Impact of changes in tax status in Australia |
— | (31 | ) | (5 | ) | |||||||
| Canadian tax rate changes |
64 | 12 | — | |||||||||
| Withholding taxes |
17 | 19 | 8 | |||||||||
| Mining taxes |
19 | 9 | 1 | |||||||||
| Other items |
19 | (7 | ) | 1 | ||||||||
| Income tax expense |
$ | 341 | $ | 348 | $ | 60 | ||||||
| 1 | We are able to claim certain allowances and tax deductions unique to extractive industries that result in a lower effective tax rate. |
| 2 | We operate in multiple foreign tax jurisdictions that have tax rates different than the Canadian statutory rate. Additionally, we have reinvested earnings and cash flow generated by the Zaldívar mine in Chile to fund a portion of the construction cost of Pascua-Lama. The reinvestment of these earnings and cash flow resulted in a lower tax rate applied for the period. Amounts in 2007 included the impact of losses realized on deliveries into corporate gold sales contracts in a low tax jurisdiction. |
| BARRICK YEAR-END 2008 |
A-31 | NOTES TO FINANCIAL STATEMENTS |
| For the years ended Dec.31 ($ millions, except shares in millions and per share amounts in |
2007 | 2006 | 2005 | |||||||||||||||
| Basic | Diluted | Basic | Diluted | Basic | Diluted | |||||||||||||
| Income from continuing operations |
$ | 1,110 | $ | 1,110 | $ | 1,209 | $ | 1,209 | $ | 395 | $ | 395 | ||||||
| Plus: interest on convertible debentures |
— | 2 | — | 4 | — | — | ||||||||||||
| Income available to common shareholders and after assumed conversions |
1,110 | 1,112 | 1,209 | 1,213 | 395 | 395 | ||||||||||||
| Income from discontinued operations |
9 | 9 | 297 | 297 | — | — | ||||||||||||
| Income before cumulative effect of changes in accounting principles |
1,119 | 1,121 | 1,506 | 1,510 | 395 | 395 | ||||||||||||
| Cumulative effect of changes in accounting principles |
— | — | — | — | 6 | 6 | ||||||||||||
| Net income |
$ | 1,119 | $ | 1,121 | $ | 1,506 | $ | 1,510 | $ | 401 | $ | 401 | ||||||
| Weighted average shares outstanding |
867 | 867 | 842 | 842 | 536 | 536 | ||||||||||||
| Effect of dilutive securities |
||||||||||||||||||
| Stock options |
— | 3 | — | 4 | — | 2 | ||||||||||||
| Convertible debentures |
— | 9 | — | 9 | — | — | ||||||||||||
| 867 | 879 | 842 | 855 | 536 | 538 | |||||||||||||
| Earnings per share |
||||||||||||||||||
| Income from continuing operations |
$ | 1.28 | $ | 1.27 | $ | 1.44 | $ | 1.42 | $ | 0.74 | $ | 0.73 | ||||||
| Income before cumulative effect of changes in accounting principles |
$ | 1.29 | $ | 1.28 | $ | 1.79 | $ | 1.77 | $ | 0.74 | $ | 0.73 | ||||||
| Net income |
$ | 1.29 | $ | 1.28 | $ | 1.79 | $ | 1.77 | $ | 0.75 | $ | 0.75 | ||||||
Earnings per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if additional common shares are assumed to be issued under securities that entitle their holders to obtain common shares in the future. For stock options, the number of additional shares for inclusion in diluted earnings per share calculations is determined using the treasury stock method. Under this method, stock options, whose exercise price is less than the average market price of our common shares, are assumed to be exercised and the proceeds are used to repurchase common shares at the average market price for the period. The incremental number of common shares issued under stock options and repurchased from proceeds is included in the calculation of diluted earnings per share. For convertible debentures, the number of additional shares for inclusion in diluted earnings per share calculations is determined using the as if converted method. The incremental number of common shares issued is included in the number of weighted average shares outstanding and interest on the convertible debentures is excluded from the calculation of income.
| BARRICK YEAR-END 2008 |
A-32 | NOTES TO FINANCIAL STATEMENTS |
A Operating Cash Flows—Other Items
| For the years ended Dec.31 |
2007 | 2006 | 2005 | |||||||||
| Adjustments for non-cash income statement items: |
||||||||||||
| Currency translation (gains) losses (note 8A and 8C) |
1 | (2 | ) | (3 | ) | |||||||
| Accretion expense (note 21) |
50 | 39 | 21 | |||||||||
| Cumulative accounting changes |
— | — | (6 | ) | ||||||||
| Amortization of discount/premium on debt securities (note 20B) |
(3 | ) | (12 | ) | — | |||||||
| Amortization of debt issue costs (note 20B) |
9 | 12 | 2 | |||||||||
| Stock option expense (note 26) |
25 | 27 | — | |||||||||
| Non-hedge derivative gold options |
30 | 14 | — | |||||||||
| Hedge losses on acquired gold hedge position |
2 | 165 | — | |||||||||
| Gain on Highland vend-in (note 8C) |
— | (51 | ) | — | ||||||||
| Gain on Kabanga transaction (note 8C) |
— | — | (15 | ) | ||||||||
| Equity in investees (note 12) |
43 | 4 | 6 | |||||||||
| Gain on sale of long-lived assets (note 8C) |
(2 | ) | (9 | ) | (5 | ) | ||||||
| Impairment charges (note 8B and 12) |
65 | 23 | 16 | |||||||||
| Losses on write-down of inventory (note 13) |
13 | 28 | 15 | |||||||||
| Non-controlling interests (note 2B) |
(14 | ) | (1 | ) | 1 | |||||||
| ARO reduction |
(15 | ) | — | — | ||||||||
| Net changes in operating assets and liabilities |
(244 | ) | (142 | ) | (82 | ) | ||||||
| Settlement of AROs (note 21) |
(33 | ) | (32 | ) | (30 | ) | ||||||
| Other net operating activities |
$ | (73 | ) | $ | 63 | $ | (80 | ) | ||||
| Operating cash flow includes payments for: |
||||||||||||
| Pension plan contributions (note 27A) |
$ | 49 | $ | 36 | $ | 20 | ||||||
| Interest (net of amounts capitalized) |
$ | 236 | $ | 211 | $ | 108 | ||||||
B Investing Cash Flows—Other Items
| For the years ended Dec.31 |
2007 | 2006 | 2005 | ||||||||
| Loans to joint venture partners |
$ | (47 | ) | — | — | ||||||
| Non-hedge derivative copper options |
(23 | ) | — | — | |||||||
| Decrease in restricted cash (note 14) |
19 | — | — | ||||||||
| Other |
9 | 17 | (5 | ) | |||||||
| Other net investing activities |
$ | (42 | ) | $ | 17 | $ | (5 | ) | |||
C Non-Cash Investing and Financing Activities
Donlin Creek
In 2007, we formed a limited liability company with NovaGold to advance the Donlin Creek project. We determined that we share joint control with NovaGold and we use the equity method of accounting for our investment in Donlin Creek. The initial cost of our investment is $64 million.
Placer Dome Acquisition
We purchased all of the common shares of Placer Dome in 2006 for $10,054 million (see note 3G). In conjunction with the acquisition, liabilities were assumed as follows:
| Fair value of assets acquired1 |
$ | 15,346 | |
| Consideration paid |
10,054 | ||
| Liabilities assumed2 |
$ | 4,830 | |
| BARRICK YEAR-END 2008 |
A-33 | NOTES TO FINANCIAL STATEMENTS |
| 1 | Includes cash of $1,102 million. |
| 2 | Includes debt obligations of $1,252 million (note 20B). |
Vend-in of Assets to Highland Gold (“Highland”)
In 2006, we exchanged various interests in mineral properties for 34.3 million Highland shares with a value of $95 million at the time of closing of the transaction (see note 12).
Sale of South Deep
In 2006 we sold the South Deep mine to Gold Fields Limited (“Gold Fields”) for $1,517 million. The proceeds included 18.7 million Gold Fields common shares with a value of $308 million (see note 3H).
| At Dec.31 |
2007 | 2006 | ||||||||||||
| Fair value |
Gains (losses) in OCI |
Fair value |
Gains (losses) in OCI |
|||||||||||
| Available-for-sale Securities in an unrealized gain position |
||||||||||||||
| Benefit plans:1 |
||||||||||||||
| Fixed-income securities |
$ | 4 | $ | — | $ | 5 | $ | — | ||||||
| Equity securities |
14 | 1 | 16 | 2 | ||||||||||
| Other investments: |
||||||||||||||
| NovaGold |
— | — | 231 | 13 | ||||||||||
| Gold Fields |
— | — | 314 | 6 | ||||||||||
| Other equity securities |
73 | 41 | 77 | 33 | ||||||||||
| 91 | 42 | 643 | 54 | |||||||||||
| Securities in an unrealized loss position |
||||||||||||||
| Other equity securities2 |
5 | (1 | ) | 3 | (1 | ) | ||||||||
| $ | 96 | $ | 41 | $ | 646 | $ | 53 | |||||||
| Held-to-maturity securities |
||||||||||||||
| Asset-Backed Commercial Paper |
46 | — | — | — | ||||||||||
| $ | 142 | $ | 41 | $ | 646 | $ | 53 | |||||||
| 1 | Under various benefit plans for certain former Homestake executives, a portfolio of marketable fixed-income and equity securities are held in a rabbi trust that is used to fund obligations under the plans. |
| 2 | Other equity securities in a loss position consist of investments in various junior mining companies. |
Accounting Policy for Available-for-Sale Securities
Available-for-sale securities are recorded at fair value with unrealized gains and losses recorded in other comprehensive income (“OCI”). Realized gains and losses are recorded in earnings when investments mature or on sale, calculated using the average cost of securities sold. Investments in debt securities that we intend to hold to maturity are classified as held-to-maturity. Held-to-maturity investments are recorded at amortized cost. If the fair value of an investment declines below its carrying amount, we undertake an assessment of whether the impairment is other-than-temporary. We consider all relevant facts and circumstances in this assessment, particularly: the length of time and extent to which fair value has been less than the carrying amount; the financial condition and near-term prospects of the investee, including any specific events that have impacted its
| BARRICK YEAR-END 2008 |
A-34 | NOTES TO FINANCIAL STATEMENTS |
fair value; both positive and negative evidence that the carrying amount is recoverable within a reasonable period of time; and our ability and intent to hold the investment for a reasonable period of time sufficient for an expected recovery of the fair value up to or beyond the carrying amount. We record in earnings any unrealized declines in fair value judged to be other than temporary.
Available-for-Sale Securities Continuity
| Goldfields | NovaGold | Other | Total | |||||||||||||
| January 1, 2005 |
$ | — | $ | — | $ | 61 | $ | 61 | ||||||||
| Purchases |
— | — | 31 | 31 | ||||||||||||
| Sales proceeds |
— | — | (10 | ) | (10 | ) | ||||||||||
| Mark to market adjustments |
— | — | (20 | ) | (20 | ) | ||||||||||
| January 1, 2006 |
— | — | 62 | 62 | ||||||||||||
| Purchases |
— | 218 | 27 | 245 | ||||||||||||
| Received in consideration for sale of South Deep (note 3H) |
308 | — | — | 308 | ||||||||||||
| Sales proceeds |
— | — | (46 | ) | (46 | ) | ||||||||||
| Mark to market adjustments |
6 | 13 | 58 | 77 | ||||||||||||