September 10, 2008 / 12:04 AM / 10 years ago

CORRECTED - UPDATE 3-Barrick confirms cost view

(In Sept. 9 story, corrects cost guidance range in second paragraph to $425-445, not $425-455) (Adds paragraph 8 on industry M&A environment and paragraphs 14-16 on gold price outlook)

By Frank Tang

DENVER, Sept 9 (Reuters) - A senior executive of Barrick Gold (ABX.TO) said on Tuesday that the world’s largest gold producer will meet its cost expectations for this year, and that no big merger and acquisition plan was imminent.

When asked if Barrick will meet its full-year cost outlook of $425 to $445 an ounce, Alex Davidson, executive vice president for exploration and corporate development, told Reuters in an interview at the Denver Gold Forum that “We will definitely make the guidance.”

Davidson cited lower cost pressure because of crude oil’s decline from its peak of nearly $150 per barrel.


In terms of growth strategy, Davidson said Toronto-based Barrick will focus on both organic growth and acquisitions.

“We look at the assets first to see if they are a good fit with our own asset portfolio, and then we decide what to do from there,” Davidson said.

“We are more interested in projects and areas that we are already in,” he said.

When asked if there will be another large-scale acquisition in the gold mining industry, Davidson said “We are certainly not planning anything imminent.”

Commenting on the industry landscape on mergers and acquisitions, Davidson said “I think consolidation is more likely at the junior and mid-tier levels than at the bigger level ... especially at the junior level because the juniors are having liquidity problems.”


The company is also waiting for Argentina and Chile to conclude a tax agreement at Barrick’s Pascua Lama deposit, which straddles the border of the two countries.

“We are confident that the (Pascua Lama) situation is going to get resolved. It’s a project that we want in our stable and we will continue with it,” Davidson said.

Pascua Lama straddles a shared border in the Andes at about 5,500 meters (18,000 feet) above sea level, and holds a treasure trove of some 17 million ounces of gold and one of the world’s largest deposits of silver.

Construction of the project has been delayed for years, first as the company worked its way through environmental permitting and subsequently as Chile and Argentina try to work out which taxes should be paid on which side of the border.

Davidson said that once the company gets the final green light on the $2.4 billion project, it will take between 2.5- and three years to build a mine.

Barrick’s Davidson is scheduled to address the Denver Gold Forum in a corporate presentation on Wednesday.

In terms of the gold price outlook, Davidson said that Barrick is very still bullish on gold prices.

“The supply-demand fundamentals are very good, and supply will fall off year over year. Demand is very strong from India, China, the Middle East and Turkey. We continue to see weakness in the U.S. dollar over the long term,” he said. (Additional reporting by Pav Jordan in Chile; Editing by Marguerita Choy, Bernard Orr)

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