DBRS Confirms Barrick at “A”

DBRS has today confirmed Barrick Gold Corporation’s (Barrick or the Company) “A” rating on its debt obligations and the R-1 (low) rating on its Commercial Paper. The trend for all ratings is Stable. Barrick is the world’s largest gold miner and a significant producer of copper, with competitive mining operations around the world and a solid financial profile. DBRS expects that robust earnings and cash flow from Barrick’s gold operations will be sufficient for it to fund its heavy project investment schedule while maintaining financial metrics characteristic of an A-rated company.

The outlook for 2009 gold markets is buoyant, more than offsetting weakness expected in copper markets. Barrick’s gold operations are cost-competitive, with an average cash cost of production for 2008 of $443 per ounce, placing the Company among the lowest-cost of gold producers and with healthy operating margins, as gold prices are currently over $900 per ounce.

Barrick produced 7.7 million ounces of gold in 2008 (8.1 million 2007) and had proven and probable reserves of 139 million ounces at an average grade of 0.046 ounces per ton as at December 31, 2008. This compares to the second largest gold producer, Newmont Mining Corporation, which produced 7.3 million ounces of gold in 2008 and had proven and probable reserves of 85.0 million ounces at a grade of 0.031 ounces per ton.

Barrick has an extensive gold-oriented project pipeline with mines or major expansions under construction in the United States, Dominican Republic and Tanzania, in addition to a number of development- and exploration-stage properties. The mine operations under construction are expected to have lower costs on average and longer remaining reserve lives than Barrick’s existing operations, preserving the Company’s cash flow-generating capability well into the future.

Barrick’s copper operations provide meaningful product diversification (22% in 2008 and 39% in 2007 of segment operating income). Gold and copper markets are driven by differing fundamentals and the trend in their prices is often different (as is currently the case). This divergence serves to reduce the volatility of the Company’s earnings and cash flow, which reduces the risk of a precipitous drop in earnings and cash flow, as might be experienced by a single-product company.

The Company has been able to maintain a strong credit profile despite volatility in its product prices, an aggressive acquisition program, and large investments in mine development and construction since 2005. Leverage has increased to 23% at the end of 2008 from 18% in 2007, although EBITDA interest coverage is sound at 14 times for the year (14 times in 2007 as well). The Company has used an appropriate mix of asset sales, equity financing and internal cash flow to manage debt levels and to maintain financial metrics.

Barrick is expected to generate strong operating cash flows throughout 2009 as stable gold production and high gold prices serve to offset a decline in copper prices. Operating cost increases, which have been high over the last couple of years, are expected to moderate as the prices of key inputs such as fuel and sulphur have dropped significantly. The Company’s ambitious expansion program is expected to continue unabated as long as gold prices remain strong, and acquisitions cannot be ruled out.

DBRS also expects that Barrick will continue to use an appropriate mix of debt and equity for any funding needs in excess of immediate operating cash flows in order to maintain its solid financial profile consistent with the current rating. Over the longer term, copper prices are expected to recover, which will help offset any future volatility in the price of gold.

Barrick has benefited from the steep rise in the price of gold, which has more than doubled in the five years since 2003, but this has masked an equally steep rise in the Company’s cash cost of production. Although gold prices are expected to remain strong and production cost increases will likely moderate in 2009, in part due to weakening currencies in several production regions, any significant reversal of the margin expansion seen to date can be expected to reduce cash flow from operations. If this happens, the Company will have to be judicious in the financing of its aggressive expansion capital expenditure and acquisition activity in order to maintain its current credit metrics.

Notes:
The applicable methodology is Rating Mining, which can be found on our website under Methodologies.

This is a Corporates rating.