Barrick Gold Corp. (ABX) | Property, Plant and Equipment

Property, Plant and Equipment Accounting Policy

Buildings, Plant and Equipment

At acquisition, Barrick records buildings, plant and equipment at cost, including all expenditures incurred to prepare an asset for its intended use. These expenditures consist of: the purchase price; brokers' commissions; and installation costs including architectural, design and engineering fees, legal fees, survey costs, site preparation costs, freight charges, transportation insurance costs, duties, testing and preparation charges.

Barrick capitalizes costs that meet the asset recognition criteria. Costs incurred that do not extend the productive capacity or useful economic life of an asset are considered repairs and maintenance expense and are accounted for as a cost of the inventory produced in the period.

Buildings, plant and equipment are depreciated over their expected useful life, which commences when the assets are considered available for use. Once buildings, plant and equipment are considered available for use they are measured at cost less accumulated depreciation and applicable impairment losses.

Depreciation on equipment utilized in the development of assets, including open pit and underground mine development, is recapitalized as development costs attributable to the related asset.

Estimated useful lives of Major Asset Categories

Buildings, plant and equipment	5 - 35 years
Underground mobile equipment	5 - 7 years
Light vehicles and other mobile equipment	2 - 3 years
Furniture, computer and office equipment	2 - 3 years

Leasing Arrangements

Barrick enters into leasing arrangements and arrangements that are in substance leasing arrangements. The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date, including whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets or whether the arrangement conveys a right to use the asset.

Leasing arrangements that transfer substantially all the risks and rewards of ownership of the asset to Barrick are classified as finance leases. Finance leases are recorded as an asset with a corresponding liability at an amount equal to the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance costs using the effective interest method, whereby a constant rate of interest expense is recognized on the balance of the liability outstanding. The interest element of the lease is charged to the consolidated statement of income as a finance cost.

PP&E assets acquired under finance leases are depreciated, once the asset becomes available for use, over the shorter of the useful life of the asset and the lease term.

All other leases are classified as operating leases. Operating lease payments are recognized as an operating cost in the consolidated statement of income on a straight-line basis over the lease term.

Mineral Properties

Mineral properties consist of: the fair value attributable to mineral reserves and resources acquired in a business combination or asset acquisition; underground mine development costs; open pit mine development costs; capitalized exploration and evaluation costs; and capitalized interest.

Acquired Mining Properties

On acquisition of a mining property Barrick prepares an estimate of the fair value attributable to the proven and probable mineral reserves, mineral resources and exploration potential attributable to the property. The estimated fair value attributable to the mineral reserves and the portion of mineral resources considered to be probable of economic extraction at the time of the acquisition is depreciated on a units of production ("UOP") basis whereby the denominator is the proven and probable reserves and the portion of mineral resources considered to be probable of economic extraction. The estimated fair value attributable to mineral resources that are not considered to be probable of economic extraction at the time of the acquisition is not subject to depreciation, until the resources become probable of economic extraction in the future. The estimated fair value attributable to exploration licenses is recorded as an intangible asset and is not subject to depreciation until the property enters production.

Underground Mine Development Costs

At underground mines, Barrick incurs development costs to build new shafts, drifts and ramps that will enable Barrick to physically access ore underground. The time over which Barrick will continue to incur these costs depends on the mine life. These underground development costs are capitalized as incurred.

Capitalized underground development costs incurred to enable access to specific ore blocks or areas of the underground mine, and which only provide an economic benefit over the period of mining that ore block or area, are depreciated on a UOP basis, whereby the denominator is estimated ounces/pounds of gold/copper in proven and probable reserves and the portion of resources within that ore block or area that is considered probable of economic extraction.

If capitalized underground development costs provide an economic benefit over the entire mine life, the costs are depreciated on a UOP basis, whereby the denominator is the estimated ounces/pounds of gold/copper in total accessible proven and probable reserves and the portion of resources that is considered probable of economic extraction.

Open Pit Mining Costs

In open pit mining operations, it is necessary to remove overburden and other waste materials to access ore from which minerals can be extracted economically. The process of mining overburden and waste materials is referred to as stripping. Stripping costs incurred in order to provide initial access to the ore body (referred to as pre-production stripping) are capitalized as open pit mine development costs.

Stripping costs incurred during the production stage of a pit are accounted for as costs of the inventory produced during the period that the stripping costs were incurred, unless these costs are expected to provide a future economic benefit. Production phase stripping costs generate a future economic benefit when the related stripping activity: (i) improves access to ore to be mined in the future; (ii) increases the fair value of the mine (or pit) as access to future mineral reserves becomes less costly; and (iii) increases the productive capacity or extends the productive life of the mine (or pit). Production phase stripping costs that are expected to generate a future economic benefit are capitalized as open pit mine development costs.

Capitalized open pit mine development costs are depreciated on a UOP basis whereby the denominator is the estimated ounces/pounds of gold/copper in the associated open pit in proven and probable reserves and the portion of resources considered probable of economic extraction based on the current LOM plan. Capitalized open pit mine development costs are depreciated once the open pit has entered production and the future economic benefit is being derived.

Oil and Gas Properties

On acquiring an oil and gas property, Barrick estimates the fair value of reserves and resources and Barrick records this amount as an asset at the date of acquisition, which is subject to depreciation, on a UOP basis over proved reserves, when the asset is available for its intended use.

Construction-in-Progress

Assets under construction at operating mines are capitalized as construction-in-progress. The cost of construction-in-progress comprises its purchase price and any costs directly attributable to bringing it into working condition for its intended use. Construction-in-progress amounts related to development projects are included in the carrying amount of the development project. Construction-in-progress amounts incurred at operating mines are presented as a separate asset within PP&E. Construction-in-progress also includes deposits on long lead items. Construction-in-progress is not depreciated. Depreciation commences once the asset is complete and available for use.

Insurance

Barrick records losses relating to insurable events as they occur. Proceeds receivable from insurance coverage are recorded at such time as receipt is virtually certain and the amount receivable is fixed or determinable. For business interruption the amount is only recognized when it is virtually certain as supported by receipt of notification of a minimum or proposed settlement amount from the insurance adjuster.

Source: Barrick Gold Corp., Annual Report

Property, Plant and Equipment Disclosure

Barrick Gold Corp., Statement of Financial Position, Property, Plant and Equipment

USD $ in millions

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010
Buildings, plant and equipment	10,371	7,352	6,808
Mining property costs subject to depreciation	18,865	19,200	14,278
Mining property costs not subject to depreciation	18,336	14,273	7,577
Oil and gas properties	1,416	1,225	754
Property, plant and equipment, cost	48,988	42,050	29,417
Accumulated depreciation and impairments	(20,271)	(13,071)	(11,527)
Property, plant and equipment, net carrying amount	28,717	28,979	17,890

Source: Based on data from Barrick Gold Corp. Annual Reports

Item	Description	The company
Property, plant and equipment, cost	Carrying amount at the balance sheet date for long-lived physical assets used in the normal conduct of business and not intended for resale. This can include land, physical structures, machinery, vehicles, furniture, computer equipment, construction in progress, and similar items. Amount does not include depreciation.	Barrick Gold Corp.'s property, plant and equipment, cost increased from 2010 to 2011 and from 2011 to 2012.
Property, plant and equipment, net carrying amount	Tangible assets that are held by an entity for use in the production or supply of goods and services, for rental to others, or for administrative purposes and that are expected to provide economic benefit for more than one year; net of accumulated depreciation. Examples include land, buildings, and production equipment.	Barrick Gold Corp.'s property, plant and equipment, net carrying amount increased from 2010 to 2011 but then slightly declined from 2011 to 2012.

Property, Plant and Equipment Ratios (Summary)

Barrick Gold Corp., Property, Plant and Equipment Ratios

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010
Average age	41.38%	31.08%	39.18%
Estimated total useful life (years)	7	27	20
Estimated age, time elapsed since purchase (years)	3	9	8
Estimated remaining life (years)	4	19	12

Ratio	Description	The company
Average age	As long as straight-line depreciation is used, this is an accurate estimate of asset age as a percentage of depreciable life. The relative age is a useful measure of whether the company's fixed asset base is old or new. Newer assets are likely to be more efficient.	Barrick Gold Corp.'s average age of depreciable property, plant and equipment improved from 2010 to 2011 but then deteriorated significantly from 2011 to 2012.
Estimated total useful life	Over longer time periods, this ratio is a useful measure of company's depreciation policy and can be used for comparisons with competitors.	Barrick Gold Corp.'s estimated total useful life of depreciable property, plant and equipment increased from 2010 to 2011 but then declined significantly from 2011 to 2012.
Estimated time elapsed since purchase	The approximate age in years of a company's fixed assets. Useful for comparison purposes.	Barrick Gold Corp.'s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2010 to 2011 but then improved from 2011 to 2012 exceeding 2010 level.
Estimated remaining life		Barrick Gold Corp.'s estimated remaining life of depreciable property, plant and equipment increased from 2010 to 2011 but then declined significantly from 2011 to 2012.

Average Age

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010
Selected Financial Data (USD $ in millions)
Accumulated depreciation and impairments	20,271	13,071	11,527
Property, plant and equipment, cost	48,988	42,050	29,417
Ratio
Average age¹	41.38%	31.08%	39.18%

2012 Calculations

¹ Average age = 100 × Accumulated depreciation and impairments ÷ Property, plant and equipment, cost
= 100 × 20,271 ÷ 48,988 = 41.38%

Ratio	Description	The company
Average age	As long as straight-line depreciation is used, this is an accurate estimate of asset age as a percentage of depreciable life. The relative age is a useful measure of whether the company's fixed asset base is old or new. Newer assets are likely to be more efficient.	Barrick Gold Corp.'s average age of depreciable property, plant and equipment improved from 2010 to 2011 but then deteriorated significantly from 2011 to 2012.

Estimated Total Useful Life

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010
Selected Financial Data (USD $ in millions)
Property, plant and equipment, cost	48,988	42,050	29,417
Depreciation expense and impairment charges	7,113	1,532	1,478
Ratio
Estimated total useful life (years)¹	7	27	20

2012 Calculations

¹ Estimated total useful life (years) = Property, plant and equipment, cost ÷ Depreciation expense and impairment charges
= 48,988 ÷ 7,113 = 7

Ratio	Description	The company
Estimated total useful life	Over longer time periods, this ratio is a useful measure of company's depreciation policy and can be used for comparisons with competitors.	Barrick Gold Corp.'s estimated total useful life of depreciable property, plant and equipment increased from 2010 to 2011 but then declined significantly from 2011 to 2012.

Estimated Age, Time Elapsed Since Purchase

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010
Selected Financial Data (USD $ in millions)
Accumulated depreciation and impairments	20,271	13,071	11,527
Depreciation expense and impairment charges	7,113	1,532	1,478
Ratio
Time elapsed since purchase (years)¹	3	9	8

2012 Calculations

¹ Time elapsed since purchase (years) = Accumulated depreciation and impairments ÷ Depreciation expense and impairment charges
= 20,271 ÷ 7,113 = 3

Ratio	Description	The company
Estimated time elapsed since purchase	The approximate age in years of a company's fixed assets. Useful for comparison purposes.	Barrick Gold Corp.'s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2010 to 2011 but then improved from 2011 to 2012 exceeding 2010 level.

Estimated Remaining Life

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010
Selected Financial Data (USD $ in millions)
Property, plant and equipment, net carrying amount	28,717	28,979	17,890
Depreciation expense and impairment charges	7,113	1,532	1,478
Ratio
Estimated remaining life (years)¹	4	19	12

2012 Calculations

¹ Estimated remaining life (years) = Property, plant and equipment, net carrying amount ÷ Depreciation expense and impairment charges
= 28,717 ÷ 7,113 = 4

Ratio	Description	The company
Estimated remaining life		Barrick Gold Corp.'s estimated remaining life of depreciable property, plant and equipment increased from 2010 to 2011 but then declined significantly from 2011 to 2012.