Gold Market Review and Outlook

Transcription

1 Goldletter I N T E R N A T I O N A L the international independent information and advice bulletin for gold and related inves tments Quarter 4, 2018 / January 2019 Gold Market Review and Outlook Marino G. Pieterse, publisher and editor Gold price cannot rely on fundamentals in 2019, but will benefit from deepening global geopolitical turmoil Brexit turbulence, growing populism in other EU member countries and in particular the US-China trade war, were in line with my expectation that the gold price will be driven by the turbulence on the global financial markets, rather than by growing physical demand. Nevertheless, instead, after having reached a high of $ 1, on January 24, 2018 and a low of $ 1, on August 17, 2018, as a result of an ongoing decline in physical gold demand, it was not earlier than in the third quarter that the gold price recovered to $ 1,281.65, thereby almost fully recovering to the year-end 2017 price of $ 1,297, and as such not reflecting a growing turbulence on the financial markets on balance yet. Therefore, this does not change my view, that it will not be if but when the gold price will benefit from the named external factors, that, I expect, will chock the financial and commodity markets this year, following volatile stock markets in December 2018 and feeds my 2019 gold price target of $ 1,360 1,400. Considering structural stronger US economy and higher interest rates compared to Germany, France, the UK and Japan and the dollar s dual monetary function with China s yuan, and also noting China holding $ 1,000 billion of its $ 3,000 billion monetary reserves held in dollars, which makes the US and China currently committed to each other. Also, it is to be observed that Western worries about the sustainability of China s economic growth are strongly overvalued with a target GDP growth rate of at least 6%, and this target for 2019 to be supported by a major economic stimulus package be worth US$ billion. This stimulus, I expect, will lead to a strong recovery of basic metals prices, led by copper. Goldletter International 1 Q 4, 2018 January 2019

2 Q / January Gold Market Outlook Page General market comments Gold price cannot only rely on fundamentals in 2019, but will benfit from deepening global geopolitical turmoil... 1 Content summary 2 European Union falls apart as a result of Brexit and rising populism... 2 Gold demand in Q at tonnes, just 6.2 tonnes higher year-to-year Lion's share of Central Bank net purchases limited to three emerging countries Global gold-backed ETF holdings grew 3% in Gold-backed ETFs as of year-end Market conditions generally unfavorable for producer hedging... 5 Gold supply in Q China's gold production under pressure... 6 Gold from the fundamental perspective of supply and demand over the period Western Central Bank gold holdings compared to non-gold monetary reserves... 7 Total Monetary reserves and gold holdings of Westermn countries compared to emerging countries Gold and monetary reserves Western countries, Asian coubtries and notable other countries... 9 China's S debt-holder strategy helps to secure furure economic growth Newmont Mining and Goldcorp create world's leading gold company Barrick Gold - Randgold merger strengthens New Barrick's position as world's second leading gold company.. 12 Market valuation of the world's rop 20 gold producers European Union falls apart as a result of Brexit and rising populism in a growing number of EU countries On January 22, 2019, Germany and France signed a new treaty aimed to seal a new deal in Aken, Germany to breath life into their place at the centre of the European Union after UK moves to leave the EU and a rising tide of populism in the 27 member countries challenging the core liberal values of the block. With Germany and France wanting to open a new chapter building on the Elysee Treaty signed in 1963 between Konrad Adenauer and Charles de Gaulle, which for years stood as a symbol of Francee0German reconciliation after nearly a century of devasting wars, it is to be noted that since president Macron broached the idea in 2017 the political environment for both leaders has changed dramatically. Stung by a succession of dismal election results, Angela Merkel stood down as head of the Christian Democratic Union last year after 18 years in the job. And anti-government protests by the gilet jaunes have weakened Emmanuel Macron s authority at home. As a result, new elections in both countries will take down the floor of the EU. The European context is also less amenable to bold to reform initiatives, with populists on the march in Italy, illiberal democracies in Hungary and Poland and EU leaders preparing for the eventuality of a no-deal Brexit next March. Also, important EU countries including Spain Sweden, Netherlands and Belgium are faced with growing national political interest. Having no say in the execution of its economical and financial guidelines, which have to be improved by national parliaments, it is not a question of if but when the EU next to Brexit will break up further. Goldletter International 2 Q 4, 2018 January 2019

3 Gold demand in Q at tonnes, just 6.2 tonnes higher year to year Jewelry demand saw price led year-on-year growth of 6% from tonnes in Q to tonnes in Demand from both China and India, the world s largest jewelry markets, increased by 10% from tonnes to tonnes and tonnes to tonnes, respectively, and are responsible for 32.5% and 27.8% of total world demand, respectively (60.3% combined). In the first 9 months of 2018, jewelry fabrication declined from 1,634 tonnes in the same period of 2017 to 1,552 tonnes. Technology demand grew 1% from 84.3 tonnes to 85.3 tonnes in Q3 2018, of which Electronics moved up 2% from 67.4 tonnes to 68.5 tonnes, with notable strength in the pointed circuit board (PCB) sector and demand for other industrial increased 1% from 12.8 tonnes to 12.9 tonnes. Global bar and coin demand bounced back in Q3 to tonnes, rising 28% year-on-year and 20% quarter-on-quarter. China, the world s largest bar and coin market shot up 25% y-u-y and q-o-q to reach 86.5 tonnes in Q3, comfortably above its three- and 5-year q is to be is to be seen as quarterly average of 71.4 tonnes and 65 tonnes, respectively. The strongly growing demand is to be seen as a backdrop of financial vulnerability due to domestic equities and bonds having suffered in 2018 as trade war tensions have escalated. The CSI 300, China s leading equity-index, dropped 15% to the end of September and the credit spread between NA = cooperate bonds and the quasi-sovereign China Development Bank bond ballooned to almost 190 bps over the same period, highlighting concerns about prospects to domestic campaigns. The quarter s price dip proved a good buying opportunity. In August, the Shanghai Gold Exchange benchmark gold-price dropped to RMB 262/g, the lowest level since Interestingly, commercial banks gold bar and coin sales performed relatively well, indicating strong demand from the mass retail market. Demand in India was encouraged by lower prices and equity weakness. The country s bar and coin demand picked up in Q3 to reach 34.4 tonnes, but remains below the 3-year average of 43.1 tonnes. August was the strongest month of the quarter as the domestic gold price fell below Rs 29,700/10g, dropping to its lowest 2018 level. The bar and open market is predominantly the preserve of the urban India investor-rural investors, typically invest 22ct jewelry. Urban investors are more likely to hold a well-diversified portfolio and, for them, equity market volatility created an unsettling backdrop. In September the BSE Semex fell 8% and has continued to tumble in October supporting demand for bars and coins. The picture was similar elsewhere in Asia. The fall in the gold price, tumbling equity markets and depreciating currencies in Vietnam, Thailand Indonesia and Malaysia boosted bar and coin demand. But other country specific factors were in play. Malaysia benefitted from the removal of 6% GST and rumors remained in the Thai market that the government may follow India s lead and clamp down on unaccounted money. The Middle East bar and coin market has continued its recent uptrend rising 144% year-on-year and 28% quarter-on-quarter. Demand reached 27.8 tonnes, its highest level since Q2 2013, a period when demand spiked in response to a sharp fall in the gold price. Recent positive momentum continued in Iran in Q3. Demand hit 21.1 tonnes the highest since Q and accounted for three quarters of the Middle East market. Renewed sanctions and the plummeting rial with expectations for its fall further underpinned the flight to gold VAR-free bars and coins were preferred over jewelry, which is subject to 9% tax. Bar and coin demand in Turkey in Q3 reacted differently to the mix of financial insecurity and currency weakness. As the Turkish lira gold price rose in August to a record high of TL 273/g, investors liquidated some of their bar and coin holdings to book profits. Net new buying fell to 4.6 tonnes, a drop of 69% on the same period last year. Goldletter International 3 Q 4, 2018 January 2019

4 European bar and coin demand in Q3 was 51.1 tonnes, up 10% year-on-year in Germany which accounts for more than half of the region s bar and coin country investment was up 10% to 28.4 tonnes. In late September the euro-denominated gold price fell to a two-and-a half year low of 32,638/kg. Unlike tie European ETF market, concerns around Italian debt and its potential to spark a broader financial crisis, promised safe-haven buying among retail investors. Having been in the doldrums for several quarters, the US bar and coin market showed signs of life. Demand reached double-digits 10.5 tonnes, up 74% year-on-year. Growth was largely fueled by bargain hunting in June when the gold price dropped from more than US$ 1,300/oz to close on US$ 1,250/oz. Lion s share of Central Bank net purchases limited to three emerging countries Central Bank net purchases of tonnes in Q3 were 22% higher year-on-year compared with tonnes in Q3 2017, the highest level of quarterly demand since Q , both at the quarterly and year-today level. Russia, Turley and Kazakhstan continue to account for the lion s share of purchases, but were joint by a growing number of like-minded central banks. Russian gold holdings continued to grow as it sold its dollar assets. Q tonnes increase was the country s biggest quarterly net purchase on record. Russian reserves amounted to over 2,000 tonnes for the first time, equivalent to 17% of total reserves. Earlier this year, First Deputy Governor Dmitry Tulin, stated that he sees gold is a 100% guarantee from legal and political risks, highlighting its lack of counterparty risk and wider risk hedging properties. Eussia has already sold the majority of its holdings of US Treasuries and said it will continue its policy of dedollarization. Despite political and economic turmoil Turkey continued to add gold to its reserves. Net purchases (excluding Reserve Option Mechanism holdings) grew by 8,5 tonnes in Q3, a quarter that saw the lira weaken by 25%. This brought official holdings to tonnes. By contrast, Reserve Option Mechanism holdings at the central bank declined by tonnes. Responding to growing financial stress, the Turkish central bank loosened liquidity measures n August reducing the amount of gold (as well as domestic and foreign currency) commercial banks are required to hold as art of their reserves. The subsequent decline in ROM resources is likely due to the unwinding savings of swaps rather than sales. Kazakhstan continued its steady accumulation of gold. Gold reserves at the central bank continued to rise throughout Q3. Net purchases of 13.4 tonnes for the quarter brought total reserves to tonnes. For the first time un 7 years the central bank plans to start selling small amounts of billion internationally in order to make domestic gold more recognized in the market. After minor purchases over recent months, the Reserve Bank of India ramped up its buying in Q3, increasing reserves by a further 13.7 tonnes. This brings year-to-date purchases to 21.8 tonnes. European central banks also started to buy gold. The National Bank of Poland bought gold every months in the quarter boosting the overall level of reserves by 3.7 tonnes to tonnes. And in early October, Hungary announced that it had increased gold reserves 10-fold from 3.1 tonnes to 31.5 tonnes, its highest level since 1990 with the aim of enhancing the long-term stability of its reserve portfolio, citing gold s lack of counterpart of credit risk as key benefits. Q 3 was also marked by several reports of purchases that have yet to be reported via the IMF International Financial Statistics. In early September, the central bank of Iraq stated that it had taken advantage of lower gold prices to buy 6.5 tonnes, but the timing of these purchases remains unknown. Similarly, the Mongolian central bank bought 12/2 tonnes in the first eight months of this year, matching its purchasing to the same period of last year and buying more than half of its full-year target. Net sales were virtually non-existent in Q3. Czech Republic (-0.5 tonnes), and Germany (-0.2 tonnes), the latter to its coin-minting programme, were the only countries that registered visible declines. Goldletter International 4 Q 4, 2018 January 2019

5 Global gold-backed ETF holdings grew 3% in 2018 According to statistics of the World Gold Council released on January 8, 2018, holdings in global goldbacked ETFs and similar products rose by 69 tonnes to 2,440 tonnes in 2018, equivalent to US$ 3.4 billion in inflows. The ETFs grew 3% in 2018, driven by strong growth in European funds and increased global inflows during December. This is the first time since 2012 that the value of total gold-backed ETF holdings has finished the year above US$ 100 billion inflows were driven primarily by European-based funds, which grew 10% over the year to 96.8 tonnes, equivalent to $ 4.5 billion. For a second straight year Germany led country inflows, adding US$ 2 billion. UKbased funds followed with inflows of $ 1.7 billion, largely due to uncertainty surrounding Brexit. On an absolute basis, North American funds which tend to be more price and momentum driven led outflows, driven by the weak performance of gold during the third quarter. These flows reversed in the fourth quarter to make up for most of the previous losses, Low-cost US-based ETFs are a bright spot in North America, raising $ 775 million in assets, a sign of increased demand for holding gold as a long-term strategic asset. Overview gold-backed ETFs as of year-end 2018 Total AUM Change Year-end 2018 (US$ billion) tonnes Flows Flows (US$ million (% AUM) North Ameica Europe , Asia Other Global inflows , Global outflows , Total , Market conditions generally unfavorable for producer hedging Gold miners reduced their hedging positions by a further 20 tonnes in Q3. This followed 43.1 tonnes of net hedging in Q2 the highest level of quarterly de-hedging since 2010 and reduced the global hedge book to 1,971 tonnes, a decline of 17% year-on-year. Market conditions were generally unfavorable for producer hedging: existing short-term hedging positions reaching maturity and general weakness in gold prices (across many producer currencies) lowered the incentive for fresh hedging agreements. Hedged remain sporadic and largely tactical. Australia s Resolute Mining responded to volatility in the local gold price by adding 35,000 ounces to its existing hedge book in Q3. This brought its existing hedge position to 85,000 ounces, which is helping to support the Ravenwood Expansion Project. Towards the end of the quarter DRD Gold announced it would hedge 50,000 ounces to address increased liquidity risk stemming from its acquisition of Far West Gold Recoveries from Sibanye-Stillwater. But the Company was clear that this hedge was tactical in nature. Goldletter International 5 Q 4, 2018 January 2019

6 In September, Polyus said that it does not plan to extend its hedging programme beyond The Company has been responsible for some of the largest tactical hedging agreements in recent years, such as 2,83 million ounces (88 tonnes) in 2014 and the 625,000 oz (19.4 tonnes) in While due to the fall of the gold prices from an average price of $ 1,669 in 2012 and $ 1,411 in 2013 to an average level of $ 1,266 in 2014 and a low of $ 1,160 in 2015, market conditions were generally unfavorable for producer hedging, it is striking to see that at significantly higher price levels in general, resulting in production margins to double in 2012 and 2013 hedging remained limited. Gold supply in Q Q3 total supply was slightly lower in year-on-year. Production growth was outweighed by elevated dehedging and lower recycling. Mine production reached a record quarterly mine production of tonnes up 1.9%year-on-year. De-hedging showed a second consecutive quarter of significant de-hedging of 20.0 tonnes, compared with 8.3 tonnes of hedging in Q Recycled gold fell 4% year-on-year from tonnes to tonnes as a result of lower prices discouraging consumers from selling. The rise of gold mine production in Q3 by 1.9% year-on-year is the highest level of quarterly in the records of the World Gold Council and comfortably above rh 5-year quarterly average of tonnes. Some of the largest producing nations saw double-digit declines during the quarter, but these were more than offset by significant gains elsewhere. China s gold production under pressure In China, environmental regulations introduced last year continue to impact the mining industry, National gold output fell in Q3 by 6% year-on-year as operations in or near nature reserves were closed, and as environmental levies and taxes increased. The pressures may remain for the short term. According to the latest data from the China Gold Association, China s gold output dropped 7.9% to tonnes in the first half of According to the report mined gold declined 9.4% from last year, totaling tonnes. It is expected that China gold output will show its second consecutive annual decline. In 2017, gold production was 426,142 tonnes, a decline of 6% from the previous year, which was the first decline in 17 years. The reports attributed the decline in gold production to the government s environmental crackdown on illegal mining, including withdrawal if mining rights in natural reservations. Governmental changes to mining rights transfers and royalty payments also led gold producers to curtail production, the CGA report says. Stronger environmental regulations have led to a significant drop in global production of base metals like zinc and copper. While China s domestic gold production in the first six months of the year declined the CGA said that demand saw modest o.3% increase totaling tonnes. South Africa output fell 10% year-on-year in Q3. The closure of loss-making operations such as Evander, Tautonic and Cooke contributed to this decline, as did a reduction in output from South Deep. Goldletter International 6 Q 4, 2018 January 2019

7 In Indonesia, gold output declined 13% year-on-year. The completion of Phase 6 ore at Batu Hijau was the main driver of lower year-on-year production. In Peru, Q3 output dropped 17% year-on-year over the lower production profile from mature operations such as Lagunas Norte, Ocopampa, La Zanja and La Arena, which saw production significantly decline during the quarter and reduced production pipeline. Mali (34%) and Papua New Guinea (25%) saw the largest year-on-year growth. In Mali, this was driven by the ramp-up at the Tekola and Yanfolila projects. In Papua New Guinea, Lihir and Hidden Valley were the main drivers of the increase in aggregate gold production. Production in the United States was strong in Q3, rising by 9% year-on-year. The completion of maintenance work at Barrick Nevada, as well as y-o-y production gains from Carlin, Fort Knox and Cripple Creek contributed to this increase. Canadian gold output grew 13% year-on-year in Q3, as the ramp-up of production at Brucejack, Rainy River and Moose River continued. Goldletter International 7 Q 4, 2018 January 2019

8 Western Central Bank gold holdings compared to non-gold monetary reserves October 2018 World gold holdings ,945 (in tonnes) 11 Central Bank gold holdings 26,300 31,900 20,078 * (in tonnes) Value of gold holdings ** (US$ billion) Value of non-gold holdings ,218 (US$ billion) Gold in % of total monetary reserve * 21 signatories to Central Bank Gold Agreement 4 (September ) including European Central Bank; plus United States ** based on gold price of US$ 1, per ounce (as at the end of October 2018) Total monetary reserves and gold holdings of Western countries compared to emerging countries October 2018 Monetary Gold Gold in % reserves reserves monetary in US$ million reserves * 21 signatories to CBGA 4 1, Euro area, incl. ECB USA Total 3,012 1,137 China 3, Russia India Total 4, * based on gold price of US$ 1, per ounce as at the end of October 2018 Goldletter International 8 Q 4, 2018 January 2019

9 Western countries October 2018 Gold reserves Monetary reserves Gold as in tonnes (billion $) % total monetary reserves * United States 8, Germany 3, Italy 2, France 2, Switzerland 1, Netherlands Portugal United Kingdom Spain Austria Belgium Sweden Greece Sub-total 19,766 2,124 World 33,945 Euro Area (incl.ecb) 10, ECB CBGA-4 signatories 11,944 1, (Euro area, incl ECB + Switzerland and Sweden) IMF 2,814 BIS 102 * based on gold price of $ 1, per troy ounce as at the end of October 2018 Source: IMF/World Gold Council Goldletter International 9 Q 4, 2018 January 2019

10 Asian countries October 2018 Gold reserves Total Gold as in tonnes monetary reserves % total (billion $) monetary reserves China 1,843 3, Japan 765 1, India Taiwan Philippines Thailand Singapore South Korea Indonesia Pakistan Malaysia Total 4,384 6,456 Source: IMF/World Gold Council Other notable countries October 2018 Gold reserves Total Gold as tonnes monetary reserves % total (billion $) monetary reserves Russia 2, Turkey Saudi Arabia Kazakhstan Lebanon Venezuela South Africa Mexico Libya Romania Poland Australia Brazil Total 4,166 2,002 Source: IMF/World Gold Council Goldletter International 10 Q 4, 2018 January 2019

11 China s U.S debt-holder strategy helps to secure future economic growth to replace the U.S. as the world s leading economy Holding $ 1,138 trillion of U.S. debt as of October 2018, China has the greatest amount of U.S. debt held by a foreign country. That is 28% of the $ 3.9 trillion in Treasury bills, notes and bonds held by foreign countries. The rest of the $ 2.1 trillion national debt is owned by either the American people or by the U.S. government itself. Japan comes second at $ 1,018 billion, followed by Brazil at $ 314 billion. Ireland holds $ 287 billion and the United Kingdom owns $ 264 billion. In November 2013, China held $ 1.3 trillion of U.S. debt but reduced its holdings between then and 2017 to allow its currency, the yuan, to rise. To do that China had to loosen its official peg to the dollar that made the yuan more attractive to forex traders in global markets. Most countries want their currency values to weaken so that they can survive global currency war, as lower currency values will lead to higher exports. Before, China had strengthened the yuan to the U.S. dollar conversion in response to U.S. pressure. But is reversed course when the dollar rose 25%, creating an asset bubble. Since then, yuan s exchange rate was fixed to the dollar; the increase dragged the yuan s value with it. China had to manually lower yuan value to remain competitive with other emerging countries that had freefloating currencies. China has held more than $ 1 trillion in U.S. debt every year since That is when the U.S. Department of the Treasury changed how its measures the debt. Before July 2010, Treasury reports showed that China held $ 843 billion in debt. Importantly, holding 28% of the U.S. debt owned by foreigners, helps China s economy grow, as it keeps the yuan weak relative to the dollar. As a result, Chinese exports are less expensive than U.S. products, which supports the country s highest priority to create jobs for its 1.4 billion people. By making sure the yuan is always low relative to the U.S. dollar, China s ownership of the U.S. dollar debt is shifting the economic balance of power in its favor. This would threat the yuan to replace the U.S dollar as the world s global currency and giving it political leverage in the shift of geopolitical blocks and its effect on the world economy. This has become a hot issue in 2018 due to the U.S. China trade war and significantly affecting international financial and commodity markets. In the 5-year period of the Chinese yuan lost a skinny 3% only against the U.S. dollar to the benefit of China s competitiveness compared to the United States, thereby underpinning the unofficial peg to the dollar. Newmont Mining and Goldcorp create the world s leading gold company As a response to Barrick Gold and Randgold Resources having announced on September 24, 2018 that they had reached agreement on the terms of a share-for-share merger that would strengthen New Barrick s position as the world s leading gold group, based upon a combined production of 6.5 million ounces in 2017, Newmont Mining and Goldcorp announced on January 14, 2019 that they have entered into a definitive agreement in which Newmont will acquire all of the outstanding common shares of Goldcorp in a stock-forstock transaction valued at $ 10 billion, with premium and enterprise value of $ 12.5 billion. Newmont will acquire each Goldcorp share for of a Newmont share, which represents a 17% premium based on the Company s 20-day volume weighted average. Newmont and Goldcorp shareholders will own 65% and 35% of the combined equity, respectively. The agreement will combine two gold industry leaders into Newmont Goldcorp, to create an unmatched portfolio of operations, projects, exploration opportunities, reserves and people in the gold mining sector. The transaction is expected to close in the second quarter of Goldletter International 11 Q 4, 2018 January 2019

12 Newmont Goldcorp s world-class portfolio will feature operating assets in favorable jurisdictions, an unparalleled project pipeline and exploration potential in the most prospective gold districts around the globe. The 2017 gold production actuals are: Newmont 5.3 million ounces and Goldcorp 2.6 million ounces, to a combined total of 7.9 million ounces. In addition, to providing shareholders the largest gold reserves per share, the combination is expected to be immediately accretive to Newmont s net asset value and cash flow per share and has a targeted sustainable annual dividend of $ 0.56 per share, the highest annual dividend among senior gold producers. The Company expects to generate up to $ 100 million in annual pre-tax synergies, with additional cost and efficiency opportunities. Newmont Goldcorp s reserves and resources will represent the largest in the gold sector and will be located in favorable mining jurisdictions in the Americas, Australia and Ghana, representing approximately 75%, 15% and 10%, respectively. The Company will be one of Canada s largest gold producers. Newmont Goldcorp will also prioritize project development by return and risk, while targeting $ 1.0 to $ 1.5 billion in divestitures over the next 2 years to optimize gold production at a sustainable, steady-state level of 6 to 7 million ounces annually. Supported by stable, profitable long-term production and in investment-grade balance sheet, Newmont Goldcorp will generate robust free cash flow and have the financially flexibility to fund project development and exploration I the decades ahead. Barrick Gold - Randgold merger strengthens New Barrick s position as the world s second leading gold group On September 24, 2018, Barrick Gold and Randgold Resources announced that they had reached agreement on the terms of a recommended share-for-share merger that will create superior operating metrics, including the highest adjusted EBITDA margin and the lowest total cash cost among senior gold peers. Under the terms of the merger, each Randgold shareholder will receive 6,1280 New Barrick shares for each Randgold share. On January 2, 2019, the Barrick - Randgold merger was consummated and trading started on the New York Stock Exchange. The tickle symbol on the NYSE has changed to GOLD, the ticker formerly held by Randgold on the NASDAQ. On the TSX, the ticker remained ABX. Following completion of the merger Barrick shareholders will own approximately 66.6% and Randgold shareholders will own approximately 33.4% of the New Barrick Group on a fully diluted basis. The merger has created a sector-leading gold group which owns 5 of the industry s Top 10 Tier One gold assets, including Cordez and Goldstrike in Nevada, USA (100%); Kabali in the Democratic Republic Congo (45%); Loulou-Gounkoto in Mali (80%); and Pueblo Viego in Dominican Republic (60%) and 2 with the potential to become Tier One gold assets (Goldrush/Fourmile (100%) and Turquoise Ridge (75%(), both in the SA. In the first 9 months ended September 30, 2018, Barrick had revenues of $ 5.34 billion compared to $ 6.15 million in the same period of Cost of sales were $ 3.64 billion and $ 3.89 billion, respectively. Adjusted net earnings decreased 45% from $ 623 million to $ 340 million and adjusted EBITDA fell 26% from $ 296 billion to $ 220 billion. Total capital expenditures-sustaining went down from $ 830 million to $ 699 million. Total project capital expenditures increased 73% from $ 192 million to $ 332 million. Net cash provided by operating activities decreased 9% from $ 1.47 billion to $ 1.35 billion. Free cash flow amounted to $ 328 million compared to $ 429 million in the first 9 months of Goldletter International 12 Q 4, 2018 January 2019

13 In the first 9 months gold production was 3.26 million ounces compared to 3.98 million ounces in the same period of Gold sales declined 18% from 3.93 million ounces to 3.31 million ounces. The average realized gold price increased from $ 1,250 to $ 1,284 per ounce compared to an average spot gold price of $ 1,251 and $ 1,282 per ounce respectively. The cost of sales (Barrick share) was $ 859 and $ 791, respectively. Cash costs amounted to $ 588 and $ 20 per ounce, respectively and all sustaining costs $ 813 and $ 750 per ounce, respectively, resulting in a margin of $ 471 AND $ 500 per ounce, respectively. Copper production in the first 9 months of 2018 amounted to 274 million pounds compared to 314 million pounds in the same period in Copper sold was 273 million pounds and 298 million pounds, respectively. The average realized copper price per pound moved up from $ 2.81 to $ 2.92 per pound compared to an average spot copper price of $ 3.01 and $ 2.70, respectively. Cost of sales (Barrick share) increased from $ 1.72 to $ 2.22 per pound. C1 cash costs were $ 1.97 and $ 1.64 per pound, respectively and all-in sustaining costs $ 2.76 and $ 2.27 per pound, respectively. In September, Barrick announced a mutual investment agreement with Shandong Gold, further strengthening the Company s partnership with one of China s leading mining companies. Under the Agreement Shandong Gold will purchase up to $ 300 million of Barrick shares, and Barrick will invest an equivalent amount in shares of Shandong Gold Mining Co., a publicly listed company controlled by Shandong Gold. Shares will be purchased in the open market. To date, Barrick has purchased approximately $ 120 million shares of Shandong Gold Mining. Over the same period, Shandong Gold had purchased approximately $ 109 million shares of Barrick. Barrick and Shandong Gold are joint venture partner at the Veladero mine in Argentina the first step in the partnership between the two companies. As a second step, Shandong Gold is currently carrying out an independent valuation of Barrick s Lama project, including an analysis of potential synergies between Lama and the nearby Veladero operation. Barrick and Shandong Gold have also created internal working groups to share technical expertise and best practices forced on best-in-class mining practices and innovation. Goldletter International 13 Q 4, 2018 January 2019

14 Goldletter International 14 Q 4, 2018 January 2019

15 Market valuation of the world's top 20 listed gold producers December 31, 2018 Trading Share price Change High Low Shares Market capitalization symbol year-end year-end in % 12 month issued local currency US$ billion million (billion) Traditional countries (13): Canada (5) TSX - in Cdn$ Cdn$ US$ billion Barrick Gold 1) ABX , Agnico-Eagle Mines AEM Goldcorp 2) G Kinross K , IAM Gold IMG Subtotal 39.5 South Africa (3) LSE - in Randgold Resources 1) RRS JSE - in Rand Rand AngloGold Ashanti ANG Gold Fields GFI Subtotal 15.9 USA () NYSE - in US$ US$ Newmont Mining 2) NEM Australia (4) ASX - in A$ A$ Newcrest Mining NCM Evolution Mining EVN , Northern Star Resources NST Regis Resources RRL Subtotal ) on January 2, 2019 $ 6 billion takeover of Randgold Resources by Barrick Gold completed; company name changed to New Barrick Gold 2) announced on January 14, 2019 definitive agreement in which Newmont Mining will acquire stock-for-stock transaction valued at $ 10 billion of Goldcorp Emerging countries (7) : Russia (2) OTC US in US$ US$ Polyus Gold International 1) OPYGY:US LSE - in Polymetal International 2) POLY:LN Subtotal 15.4 China (1) Hong Kong / Shanghai - in HK$ HK$ Zijin Mining 3) 2899 / , Peru (1) NYSE - in US$ US$ Minas Buenaventura BVN Brasil (1) TSX - in Cdn$ Cdn$ Yamana Gold YRI Nicaragua (1) NYSE - in US$ US$ B2Gold BTG West Africa (1) TSX - in C$ C$ Endeavour Mining 4) EDV Subtotal Traditional countries 95.7 Subtotal Emerging countries 35.2 Total ) combination of KazakhGold with Polyus Gold 2) also producing gold mine in Kazakhstan 3) integrated mining company; 1,729 billion domestic A-shares billion H-shares 4) operating four West African mines in Côte d"ivoire, Mali, Burkina Faso and Ghana source: Goldletter International Goldletter International 15 Q 4, 2018 January 2019

16 CALENDAR OF MINING EVENTS Media Partners 2019 February 3 7 Investing in African Mining Indaba Cape Town, South Africa February 26 - March 3 Argus Metals Week - London March 1 2 Gold Doré Forum New Delhi, India March 3 6 PDAC Toronto, Canada March Mining Investment Asia Singapore April 8 9 Mining Investment South America Buenos Aires, Argentina April 8 10 Symposium Mines Guinea SMG Conakry Guinea April Nuclear Industry Summit Latin America Buenos Aires, Argentina April Russian & CIS Metals & Mining - Moscow May Mining Investment Botswana Gaborone, Botswana June ZIMEC Zambia Int. Mining and Energy Conference Lusaka, Zambia June Mining Investment Europe Frankfurt June DRC Mining Week Lubumbashi, Democratic Republic Congo September Africa Mining Summit Gaborone, Botswana Marino G. Pieterse giving a presentation Goldletter International 16 Q 4, 2018 January 2019

17 Goldletter International 17 Q 4, 2018 January 2019

18 Goldletter International 18 Q 4, 2018 January 2019

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20 Goldletter International a publication by Metal Commodities Investment Platform, the Netherlands Marino G. Pieterse, Publisher and Editor Information and investment comments are independently and thoroughly researched and believed correct. No guaranty of absolute accuracy can be given however. Investment decisions are fully made for own risk tel.: Chamber of Commerce marino.pieterse@metalcommodities-ip.com