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Barrick discovers new ore body at 30-year-old mine in Dominican Republic

by Canadian PressBarndon Sun

TORONTO (CP) - Barrick Gold Corp. (TSX:ABX) has discovered a new ore body at its Pueblo Viejo mine at Monte Oculto, between two open pits at the 30-year old project in Dominican Republic.

However, the company is not going to alter its mining schedule or plans as a result of the discovery, as it wants to keep to its timelines to take advantage of current high gold prices, said CEO Greg Wilkins.

"We're going to keep the scope of the project as is for now," said Wilkins.

"We're going to consider that it has potential for phased expansion in the future. We're not going to stop and redefine it now," Wilkins said, adding it could turn into a "trap" with additional delays.

About $20 million was spent in the second quarter on the Pueblo Viejo project to advance the project design and engineering, exploration, community development programs and evaluation of electric power sources.

On Wednesday, Barrick reported lower profits in the second quarter as the world's biggest gold producer took a charge after it eliminated its gold hedging contracts so it can cash in on higher spot prices.

The company says government delays on its massive proposed Pascua-Lama gold project is eating into its construction schedule and it won't commit to construction contracts until it gets final government signatures.

The project, estimated at about US$2.4 billion, is located on Chile-Argentina border, has been awaiting a number of final formal approvals.

Environmental impact approvals in principle have been obtained, but not all paperwork is complete for the bilateral project. There are also many outstanding issues including tax, immigration and customs.

"The inertia with respect to signing it is really the same dialogue we've had all year. It's a matter of getting governments to sit down and sign documents," Wilkins told analysts.

"We're not going to find ourselves pregnant with major expenditures until all the signatures are on pieces of paper."

Signing construction contracts would put the company in an untenable negotiating positions with governments, Wilkins said.

"We've tried to be very clear about that with our investors. If we can't get that signed, we'll be eating into our construction schedule which will have an impact on the project.

However, the company remains hopeful since so much progress has been made to date.

Barrick says Pascua-Lama will create 5,500 jobs directly during its construction stage and 1,660 jobs over its estimated 20 years of operations.

Pascua-Lama project is just one of dozens of projects owned by Barrick, which became the world's largest gold producer following its friendly takeover of Placer Dome.

But the merger of the two companies has also taught Barrick some lessons in the art of acquisitions, Wilkins said Thursday, and the company will very selective with its future takeover targets.

Barrick is flush with investment capital, but it is seeking low-cost, long-life assets that fit in with its current geopolitical risk profile, its CEO said.

"There aren't a lot of great opportunities in a great price range at this point in time," Wilkins said.

In the future, the company will use more cash than equity in making deals, he said.

The Toronto company said late Wednesday it earned US$396 million for the three months ended June 30. That compared with profits of US$459 million in the same period last year.

Sales rose to $1.6 billion from $1.5 billion, said the company, which reports in U.S. dollars.

The latest results included an after-tax charge of $66 million after the company's decision in April to fully eliminate its corporate gold sales contracts. Excluding the impact, adjusted earnings were $462 million.

Barrick said second-quarter production fell to 1.96 million ounces, compared with 2.09 million ounces for the prior-year period. But the company said it remains on track with its 2007 full year guidance of producing 8.1 million to 8.4 million ounces of gold and 400 million pounds of copper.

Barrick, with more than 17,000 employees, operates across North and South America, Africa, Australia and other parts of the world.

RBC Dominion Securities analyst Stephen Walker, who rates Barrick a sector perform, with a price target of $32, wrote Thursday that Barrick "has a strong management team and one of the best reserve profiles in the industry."

However, "in a very competitive environment, Barrick, as with all gold mining companies, faces challenges finding and replacing mined gold reserves. The company may yet be challenged to realize the cost synergies related to the integration of the Placer assets."

Shares in Barrick were up 46 cents to $35.03 on the TSX near midday Thursday.


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