Is a t/o possible?MININGBarrick knows it can't be just about...

Is a t/o possible?


MINING
Barrick knows it can't be just about gold
Other metals may soon play larger role in firm's portfolio

ANDY HOFFMAN

MINING REPORTER

When Barrick Gold Corp. head Greg Wilkins takes the stage for investor day at a hotel ballroom in downtown Toronto today, he is sure to face the same question that continually dogs the world's largest gold producer.

With major bullion resources becoming rarer than hens' teeth, how will Barrick grow?

The chief executive officer does have an answer, but it may be difficult for some of the company's shareholders to swallow.

In addition to gold projects, Barrick has several non-gold mining prospects in development. Metals like platinum, palladium, nickel and silver could soon become a much more significant part of the company's portfolio of assets if these prospects come to fruition.
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Yet Mr. Wilkins will have to perform a delicate balancing act, analysts and fund managers say, convincing investors of the worth of these properties without losing the valuation premium the stock market tends to award gold companies.

"In a way, they have no choice," said Victor Flores, an analyst with HSBC Securities in New York. Barrick's annual gold production will be stuck at roughly 8.1 million ounces a year until 2009 with its current slate of gold mines. Unless the company is willing to make a major acquisition, which is sure to be costly in the current price environment, or manages to find a major deposit on its own through exploration, which is unlikely, Barrick would be wise to look at alternative mining opportunities rather than focusing solely on maintaining gold reserves, he said.

"When you get to that size, you have to start thinking differently. There just aren't enough large gold deposits floating around," Mr. Flores points out. "You have to start tinkering with that dreaded D-word -- diversification -- which scares many gold investors because they're worried about their hallowed premium."

The process of highlighting Barrick's non-gold assets began last week, when the company provided an update on its Kabanga nickel project in Tanzania, a 50/50 joint venture with Xstrata PLC subsidiary Xstrata Nickel.

Xstrata committed to investing a further $95-million (U.S.) in the venture and the inferred resource estimate was raised from 26.4 million tonnes at a grade of 2.6-per-cent nickel to 36.3 million tonnes grading 2.8-per-cent nickel.

With nickel prices continuing to test fresh highs -- touching a record yesterday of $40,250 a tonne on the London Metal Exchange before falling back -- investors have plenty of incentive to forgive Barrick's interest in a commodity other than gold.

"Kabanga has the potential to become a world-class nickel sulphide deposit. The most recent resource has a compelling combination of size with high grades," Mr. Wilkins said in a statement.

Barrick has recently made a habit of hanging on to platinum and palladium assets as it divests gold projects in certain regions. When it sold its stake in the South Deep mine in South Africa last year, Barrick elected to hang on to its Sedibelo platinum development project. And when Barrick consolidated its Russian assets into Highland Gold Mining in exchange for an increased stake in the company, its Fedorova platinum and palladium project was left out of the deal.

In November, Mr. Wilkins said Barrick hopes to complete a feasibility study on Fedorova within the next 18 months. "We think it is going to be quite a valuable asset and it is quite a large project, potentially, so we want to continue to have independent focus on it," he said.

Platinum has been trading at over $1,200 an ounce.

David Whetham at Scotia Cassels, who manages the Scotia Resource Fund which owns Barrick shares, said the company should be able to maintain it's gold premium so long as three-quarters of its revenue comes from bullion. "They do have some room to add non-gold assets without losing the gold multiple. If you go too far, you become less of a gold company and your valuation gets affected," he said.