FINANCE & INVESTMENT CLUB

1. BARRICK GOLDInvestology 101Ali BakhshandehfardEric LauAndrew LeeRaymond LeeJohn PelissierBo Peng FINANCE & INVESTMENT CLUB

2. Company Profile • Barrick Gold Corporation (ABX) • Sector: Basic Materials • Industry: Gold • Barrick Gold Corporation engages in the acquisition, exploration, and development of gold properties. • Its products include gold, copper, silver, and zinc. • The company holds interests in various gold mineral resources, including Goldstrike, Pueblo Viejo, Cortez, Bald Mountain, Turquoise Ridge, Round Mountain, Ruby Hill, Hemlo, Marigold, Golden Sunlight, Eskay Creek, South Arturo, and Donlin Creek mines located in North America; Lagunas Norte, Veladero, Pascua-Lama, and Pierina mines situated in South America; Porgera, Cowal, Plutonic, Kanowna, Darlot, Granny Smith, Lawlers, Henty, Osborne, and Reko Diq mines located in Australia Pacific; and Bulyanhulu, North Mara, Buzwagi, and Tulawaka mines situated in Africa. Barrick Gold Corporation's copper mines include Zaldivar Mine located in Chile and Osborne Mine situated in Australia. As of December 31, 2006, the company had proven and probable mineral reserves of 123.1 million ounces of gold, 6 billion pounds of copper, and 964 million ounces of contained silver within gold reserves. Barrick Gold Corporation was founded in 1983 and is headquartered in Toronto, Canada.

3. Gold Industry Analysis • ABX outperforms most of its competitors and is doing much better than the DJIA.

4. Competitors

5. Industry Outlook • The Gold mining industry is facing increasing costs such as energy costs, labor costs, higher commodity prices, and higher gold price related costs. • Higher crude oil prices associated with higher operating costs (diesel fuel used in mining) • Affected income for 2007 • Since 2007, all-time record high for gold price. Gold prices will keep rising due to economic uncertainty. • Decrease in global gold production should increase long-term gold prices which will balance the increasing operating costs.

6. Economic Outlook

7. Economic Outlook cont.

8. Economic Outlook cont. • Q4 Earnings up 28% to $ 537mil • Q4 OCF up 104% to 676 mil • Although net income is down to $ 1.12 bil from $ 1.51 bil, the adjusted is up 11% to $ 1.73 bil from $ 1.56 bil • Most of the adjustment due to elimination of Corporate Gold Sales Contracts $ 636 million pre-tax

9. Economic Outlook cont. • Total cash cost guidance, including royalties and production taxes which are impacted by the spot gold price, are at an assumed average gold price of $800 per ounce for the year, and an assumed oil price of $90 per barrel.

10. Economic Outlook cont.

11. Economic Outlook cont. • Cash margins for gold have been increasing over the past three years as higher market gold prices have more than offset increases in total cash costs. Assuming an average spot gold price of $900 dollars per ounce in 2008, we would expect to realize cash margins of about $500 per ounce.

12. Management’s Financial Outlook 2007 Actual 2008 Guidance Gold Production (millions of ounces) 8.1 7.6 - 8.1 Total cash costs ($ per ounce) $ 350 $ 390- 415 Amortization ($ per ounce) $ 104 $ 105 Copper Production (millions of pounds) 402 380 - 400 Total cash costs ($ per pound) $ 0.83 $ 1.15 to $1.25 Amortization ($ per pound) $ 0.32 $ 0.35 Corporate administration expense $ 155 $ 160 Exploration expense $ 179 $ 200 Project expenses: Project development expense $ 188 $ 230 Project expense included in equity pick-up $ 14 $ 140 Other expenses $ 208 $ 200 Interest income $ 141 $ 20 Interest expense $ 113 $ - Capital expenditures - sustaining $ 690 $ 600 - 800 Capital expenditures – projects $ 400 1,500-1,700 Income tax rate 25% 30%

13. Strengths • Largest Producer of Gold in the World • Bought Placer Dome in 2006, a company that specialized in mining for precious metals • Has a huge diversity in mining sites: • Papau New Guinea, USA, Canada, Australia, Peru, Chile, Russia, South Africa, Argentina, Tanzania • Pascua Lama Project in border of Chile and Argentina • A huge gold project, already under construction and set to excavate in 2009 • Invests much money into pioneering new methods to prevent pollution of nearby areas • Aggressive at expansion • Has recently acquired Cortez property (March 5 08)

14. Weaknesses • Accusations of Environmental Malpractice (Particularly in New Guinea) • Mega Hedger Company

15. Opportunities • In general, Gold is a good investment when: • Bank Failures • Great Depression (1930’s) • Low or Negative Real Interest Rates • Stagflation (1970’s) • War, Invasion, Looting, Crisis • WWII • During Times of Inflation • Barrick Gold will end Hedging over the next 10 years, starting from 2003 (thus, will grow in profits)

16. Risks • Gold is more of a store of Value as insurance, however stocks perform well in a stable economy. • Barrick Gold is a mega-hedger company (Short term risk: Barrick Gold is phasing out its hedges) • It hedges out its gold (sells its gold in private transactions at forward markets) at a fixed price. This originally was created as insurance to make sure enough income was coming in if the price of gold went down (companies that hedge believe that gold price will fall: “Hedging became extremely popular during the 1980s and 1990s because the gold price was in a long-term downtrend” (Saville, 2002). However, the price of gold is now in an accelerating up-trend, and as a result, the company has been losing money. In times of gold spike, some hedging gold companies have gone bankrupt. This is however unlikely, as Barrick is a large company. • In 2000-2002, Barrick Gold, a mega hedger, only went up 60%, while its competitor Gold fields, unhedged, went up 369% • Goldcorp, another unhedged gold company, has done better in recent history • As the US Dollar depreciates, purchasing of Gold becomes much more expensive for Americans

17. Technical Analysis I: Moving Average Buy Signal Sell Signal • Buy Signals Sell Signals

18. Technical Analysis II: Bollinger Bands Buy Signal • Method 1: buying and selling at the bands Sell Signal

19. Technical Analysis III: Bollinger Bands Buy Signal • Method 2: Buy/Sell @ the bands, exit at the Moving Average Sell Signal

20. Recommendation • We rate ABX a Strong Buy for several reasons. ABX is still on the rise in the mineral industry, especially in the interest of gold. Its mineral reserves for gold and others shall continue to expand as long as the company earnings show positive signs of linear growth. Demand for these valuable elements should exceed the supply. The company is currently not seeing sings of the following in terms of generating a profit loss: intense competition from competitors, a sharp decline in the mineral industry, and/or signs of bankruptcy. • Barrick shall continue to grow as long as maintains a steady effort. It has traditionally grown its reserve base through a combination of acquisitions and focused exploration on and around its operating properties. Barrick believes there is a higher probability of finding new mineral reserves around existing mines. Once found, these new reserves can be developed more quickly and profitably due to existing infrastructure. Barrick targets state-of-the-art technology to explore deeper and more effectively. For example, at Goldstrike, the company uses new deep-penetrating geophysical techniques and geological modeling to locate and define new targets.

21. Sources • Barrick Gold to end hedging: http://www.cbc.ca/money/story/2003/11/21/barrick211103.html • Barrick’s Hedge Book: A recipe for Disaster: http://www.gold-eagle.com/editorials_03/siebholz062903.html • Gold Stock Investing 101: http://www.zealllc.com/2002/goldstk101.htm • Wikipedia: http://en.wikipedia.org/wiki/Barrick_Gold