Encouraging exploration in South Africa would deliver enormous opportunities, says Barrick Gold president and CEO Dr Mark Bristow, a world leader in exploration success.
Bristow was commenting on the recent call for mining exploration to be encouraged, made by the economic transformation committee (ETC) of the African National Congress (ANC).
In its 30-page reconstruction, growth and transformation document, the ANC’s ETC states that companies should be encouraged to list on the Johannesburg Stock Exchange and that South African retail investors willing to invest in listed mining exploration companies should be incentivised, as is the case in other mining jurisdictions.
“Fantastic news. Now it’s about implementation, which is something that South Africa has always struggled with. But it’s a great idea and it would deliver enormous opportunities,” says Bristow, who adds that cognisance would also have to be taken of South Africa’s use-it-or-lose-it policy.
“South Africa’s use-it-or-lose-it policy on mineral rights is an important one. But at the same time, there should be a provision be able to hold onto an asset that is not yet viable, for a period of time, because exploration and trading of ideas and opportunities are as important as exploration itself.
“If you look at how we’ve grown our business, a lot happened through joint venturing with other junior companies, when we were very junior, and then even as we grew up, we still reached back into that. There’s a combination of science and entrepreneurship that makes healthy exploration business, and, of course, capital,” says Bristow.
HOW EXPLORATION CAN BE ADVANCED
To encourage exploration, Bristow says that bureaucracy needs to be removed so that people can apply for mineral rights and community consultation should be streamlined.
“Then the most important thing is the database. Everybody who is exploring should be depositing those results back with a State custodian, so that the next person can access all the information when a permit rolls over,” he says.
The ANC’s ETC document states that South Africa’s Council for Geoscience must play a leading role in the exploration drive to ensure long-term expansion of the mining sector.
“On average, the fifth person that looks at a deposit discovers it. It’s very seldom that first to arrive recognises a deposit. So, you need to be able to understand that you’ve got to keep encouraging,” Bristow points out to Mining Weekly.
DRONE TECHNOLOGY LOWERING EXPLORATION COST
Bristow says that one of the biggest single recent advances in exploration is drone technology, “because now we can do surveys at a fraction of the price, and very high quality surveys very low down, which you can’t do with an aeroplane, as you can imagine”.
Barrick is currently spending $210-million on exploration across the group. Despite the challenges presented by the Covid-19 pandemic, the Toronto-listed company's exploration teams have continued to add to the mineral inventory that is needed to sustain a profitable mining enterprise.
During the past quarter, there were significant drill results from all regions. At Pueblo Viejo, in Dominican Republic, the first structural model and state-of-the-art geophysics have unlocked a new generation of targets. At Loulo 3, in Mali, new intersections have confirmed that high-grade mineralisation is still open down plunge. Also at Loulo, the high-grade Yalea transfer zone has been extended 480 m beyond the 2019 block model and is still open down plunge. A greater than one-kilometre-long mineralised trend has been confirmed south of the Gounkoto openpit, also in Mali.
“Aerial photography, geophysics now with drones is very significant, and photographic surveys as well, to get the topography details. That’s been a big change in the way we manage our exploration. Drones are important in all aspects of mining now, but in exploration they’ve become particularly important.
“At the end of the day, education and training geologists is key, making sure that they get all the skills, because when you come out of these universities, you’ve got the basic skills and you might have a particular leaning to one way or another, but fundamentally exploration is still exactly about what it says – you’ve got to get out into the field to find things,” Bristow reminds.
HOW HOST COUNTRIES BENEFIT FROM GOLD MINING
During COVID, Barrick has not only managed to keep the Nevada Gold Mines (NGM) operations going in the US, but also all its projects and exploration, with high-grade intercepts at the Fourmile project, the highest grade ever intercept at North Leeville and the thick intercepts at Deep Post.
Interestingly, taxes were also paid in advance to relieve the economic hardship that the global pandemic had caused in the gaming and gold-rich Nevada state.
The state legislature in Nevada approved the offer by NGM to prepay net proceeds tax as a Covid relief measure. Under this arrangement, $170-million is earmarked for payment to the state by March 2021. In addition, NGM has chosen not to take up the option of deferring $40-million in payroll tax payments, which is allowed under US legislation to support companies during the pandemic.
“We recognise the importance our tax contribution makes to Nevada’s economy and NGM is stepping up to support the state at a time when other businesses there find themselves in financial distress.
“In Nevada, as elsewhere in our global operations, our aid has not been prompted by self-interested commercial considerations, but by Barrick’s foundational philosophy of partnership, which in this time of crisis has again demonstrated its value to our stakeholders,” says Bristow.
Back in 2010, Barrick and Newmont, as still separate entities, also advanced cash to Carson City because of the then great financial crisis and the impact that it had on the economy of Nevada state.
With the Covid crisis being even more hard-hitting, Barrick has again reached out to the government of the state.
“The irony is that when everyone else is doing well, the mines are struggling. Whereas when everyone else struggles, the gold mines of Nevada, which is the biggest gold producer in the world, do very well, and so it’s important that we help our state out on that basis,” says Bristow.
Also, NGM has introduced the Iati Corridor Initiative: “We put in seed capital of $5-million and have already got other people contributing. We focus on small businesses of up to 200 people employed along the Iati Corridor, which is the main corridor through the northern part of Nevada. For the next three years, we’ll support exclusively those businesses that have been impacted by Covid and then we’ll convert that into a new business startup fund to support the development of rural industry.
“Another initiative that we came up with when the lockdown was eventually lifted in our area, was to work with the local chambers of commerce in the different centres where the mines are operative and we gave every one of our employees $150 in the form of a chamber cheque, for spending at any store that is part of the local chamber of commerce. We injected $1.2-million directly into the local economy, which made a massive impact,” Bristow tells Mining Weekly.
In the Dominican Republic, Barrick’s Pueblo Viejo mine prepaid $113-million to the tax authorities, bringing its total tax payments to the government to more than $2-billion since 2013.
“In the Dominican Republic, again we’re focussing on local contractors, as we’ve done in Africa for all these years. We’re going through a very big expansion now and we’re in the first round of tendering. We’re spending about $130-million directly on construction alone. That's not procurement, just the erections, civils and mechanical engineering. So far, $100-million of that will be focused on local companies with majority Dominican ownership and employees. Again, we’re able to really support the resuscitation of industry in the Dominican Republic,” Bristow reports.
In Mali, the Loulo-Gounkoto complex made an early tax and royalty payment of $20-million and in Côte d’Ivoire, Tongon prepaid $5-million, on top of royalty receipts being higher because of the strong gold price.
In addition to prepaying taxes, Barrick group sustainability executive Grant Beringer reports that to date Barrick has provided more than $20-million in the form of medical supplies and equipment.
“We’ve worked very hard to make a big difference,” says Bristow.
In Tanzania, Barrick is bringing North Mara back into operation and restarting Bulyanhulu, which has been closed for a couple of years. Post-Acacia, it has recut all the contracts and moved its procurement and products and services sourcing to 50%-plus being in-country.
“Just to give you a feel, this last quarter, we spent, as a group, $1-billion in our host countries. That’s where the mining industry has done a great job globally. For many, Nevada is the best example because it's in a developed country but it still has the same anxieties and it’s not above crises. If you go back to 1999-2000, the mining industry in Nevada nearly failed. If you go back to 2015, Barrick nearly went bust. But in 2010 it was helping out and again now in 2020, ten years later, we’re helping out again,” he points out.
IMPORTANCE OF GOLD
Bristow regards the high price of gold during the current COVID crisis as a typical example of the countercyclicality of gold mining and the importance of having gold in investment portfolios.
“The gold price is a product of crises, so it won’t stay up there. But what it will do, certainly in this round, as we saw after the great financial crisis, gold will move its place. It went from $450/oz to between $1 000/oz and $1 200/oz then. Why? Because of all the quantitative easing and currency projections. Once again, we expect we’ll develop a new place for the gold price through this crisis, higher than the previous one, because of all the value destruction and paper money,” says Bristow.
Barrick has just reported outstanding second-quarter results showing year-to-date gold production of 2.4-million ounces, at the mid-point of its 4.6-million- to 5-million-ounce annual guidance, driven by strong operating performances, particularly from NGM, Loulo-Gounkoto and Kibali in the Democratic Republic of Congo. Barrick’s copper portfolio continued to outperform with Lumwana in Zambia posting its best quarterly production in years.
Operating cash flow exceeded $1-billion for the quarter and free cash flow was $522-million. The quarterly dividend has more than doubled since the announcement of the merger in September 2018 between Barrick and Randgold, the company Bristow founded and built, largely through discovery and development.