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Barrick Gold Corporation (NYSE:ABX)
Q3 2018 Earnings Conference Call
October 25, 2018, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, this is the conference operator. Welcome to the Barrick 2018 third quarter results conference call. During the presentation, all participants are in listen-only mode. Following the presentation, we will conduct a question and answer session. At that time, if you have a question, please press * followed by 1on your telephone keypad. At any time during the conference, please press *0.

As a reminder, this conference call is being recorded a replay will be available on Barrick's website tonight on October 25th, 2018. I would now like to turn the call over to Catherine Raw, Chief Financial Officer. Please go ahead.

Catherine Raw -- Chief Financial Officer 

Thank you. Good morning and thank you for joining us. Before we begin, I'd like to highlight that during this presentation, we'll be making forward looking statements per the slide on the screen. This slide includes summary of the significant risks and factors that could affect Barrick's future performance and our ability to deliver on these forward-looking statements. A review of our most recent AIS will provide you with a more complete discussion.

I'm here today with our Executive Chairman, John Thornton, and Senior Vice President, Operational and Technical Excellence, Greg Walker, our General Manager at Turquoise Ridge, Henri Gonin, the CEO of Barrick Nevada, Bill MacNevin, and our Executive Vice President of Exploration and Growth, Rob Krcmarov.

As per usual, our other general managers and members of the Barrick team will also be available for questions following the formal portion of the call.

Our gold and copper production and costs improved in the third quarter and our operations generated significantly higher cashflow and free cashflow compared to Q2. We're on track to meet our goals and comp guidance production as well as our cost guidance for the year. Our production will be on the lower end of that 4.5 million to 5 million ounces. I'll speak to you in more detail about our guidance and financial results in a moment.

Growth projects in Nevada are progressing well and remain on schedule and on budget. Henri will provide you with an update on the third shaft at Turquoise Ridge and Bill will speak to his recent progress at Cortez Deep South and Goldrush.

At PV, Pueblo Viejo, we made good progress during the quarter, advancing pre-feasibility-level studies for a potential plant expansion. Greg will speak to you in more detail about this as well as our other operational results. Nevada remains a key area of focus for our exploration program and it goes from strength to strength. We continue to intersect high-grade mineralization of Fourmile and have expanded the project footprint both to the north and to the south. Rob will provide you with an update on these encouraging results and plan generated for the remainder of the year.

During the quarter, we signed the mutual investment agreement with Shandong, further strengthening our partnership, the strategic nature of that partnership in particular. Under that agreement, Shandong will pledge us up to $300 million in Barrick shares and we will invest an equivalent amount of shares in Shandong over a 12-month period. The shares are being purchased on the open market and to date, Barrick has purchased approximately $120 million of shares of Shandong on the Hong Kong Stock Exchange and over the same period, Shandong Gold purchased around $109 million of shares in Barrick.

Finally, but definitely not least, during the quarter, we announced an all-share merger with Randgold Resources that will create an industry-leading gold company powered by common vision of long-term value creation.

With that, then, I'll hand over to John Thornton, our Executive Chairman, who will provide you with an update on this transformational transaction. Over to you, John.

John Thornton -- Executive Chairman

Thank you, Catherine. Good morning, everyone. Thank you for joining us. I will be succinct, but I think it's important to go back over this topic even though we've spoken with all of you, in many cases numerous times, including last week when Mark Bristow and I toured both the United States, Canada, and many parts of Europe talking to shareholders of both Barrick and Randgold.

So, you're aware that at the highest level, what we think we're doing is creating a singular company, the thesis of which is the world's leading gold company should be focused on tier one assets. By tier one assets, we've defined those as producing more than 500,000 ounces per year, having mine labs greater than 10 years, and being on the lower half of the cash cross curve.

This combination will produce a company that has five of the ten tier one assets. In addition to which, there are two high-potential tier one assets in Nevada. That's four miles and Turquoise Ridge. We also are optimistic with what we can do with Veladero and with Acacia. So, you can see a way clear to a scenario whereby this combination could have as many as nine tier-one assets within a relatively short period of time.

Now, secondly, we think this will have the strongest management team, particularly given the record of Mark Bristow. As I said to many of you as we went around the world last week, I'm hard-pressed to think of a Chief Executive in any industry that's had the two-decade long record that Mark has had, much less a Chief Executive in the gold mining industry, much less one in the gold mining industry in Africa.

We think the combination of those two ends up producing, by definition, the most attractive financial returns because the first-tier assets by definition have the highest margin to throw up the most amount of cash. That should allow you to reinvest in the business and return to your shareholders healthy dividends and hopefully alongside that will be capital appreciation. We think this is a compelling investment proposition.

Both ISS and Glass Lewis have recommended to both sets of shareholders that they vote for the transaction. We think it's very important that people vote. This is good, not only for Barrick, not only for Randgold, but also we believe for the industry.

You're all aware of the fact that the market today has been very enthusiastic about the transaction. Barrick shares are up 25% since the announcement. Rangold shares are up 28%. Over the same period of time, the senior gold peers are up approximately 3%.

So, that's now performance of more than 20%. So, I leave you with the plea and the enthusiastic plea to get out and vote and encourage your colleagues on the Rangold side to vote because we want to get this thing done and get moving and get on to the future. So, thank you very much.

Catherine Raw -- Chief Financial Officer 

Thanks, John. Moving on to the financial highlights -- during the quarter, we reported a net loss of $412 million or $0.35 a share but adjusted net earnings of $89 million or $0.08 a share. The net loss primarily reflects the impairment of Lagunas Norte following an update of the feasibility study relating to processing of carbonaceous materials or what we call C-mat and the treatment of refractory sulfide or what we call the PMR project.

Based on the results of the study, we're now advancing the C-mat project only to detailed engineering and have chosen not to proceed with PMR at this time. As a result, we carried out an impairment assessment and that resulted in a writedown of just over $400 million.

On an adjusted basis, net earnings of $0.08 were higher than Q2, primarily reflecting higher ounces sold, lower cost of sales, a reduction of G&A and a recognition of insurance crises associated with the KCGM pit wall incident, all of which offset the lower gold and copper realized prices in the quarter.

Q3 operating cashflow increased to $706 million compared to $141 million last quarter, primarily driven by higher production and lower costs, as well as favorable changes in working capital. Stronger operating cashflow drove stronger free cashflow of $319 million, a significant increase compared to the negative free cashflow in the second quarter. This is despite increase project capital of Barrick Nevada and Turquoise Ridge.

Henri and Bill will go into more detail on this. As well, we've broken out that capital both in terms of projects done during the quarter but also as incentive for total spend on each project per the request last quarterly call. So, just a flag, we do listen to you guys sometimes.

The underlying effective tax rate for ordinary income in the third quarter of 2018 was 59%, partly reflecting the in-quarter impact of adjusting our tax guidance to 48% to 50% from the previous guided 44% to 46%. The reason for this is the higher expected full-year tax rate, mainly reflecting lower than anticipated sales from operations in lower tax jurisdictions, in particular Barrick Nevada, while costs elsewhere have remained relatively stable.

We furthered our corporate rationalization efforts decentralization efforts with the aim of getting us closer to our vision of a simplified lean head office, reallocating roles to operations where appropriate and eliminating those no longer required. As a result of these efforts, we now expect corporate administration expenses to be approximately $235 million in 2018, including $36 million of one-time severance expenses.

This compares to our original guidance at the start of the year of roughly $275 million. The indicative annualized savings from our decentralized efforts at the current run rate is approximately $100 million. So, now with respect to guidance, we remain on track to meet full year production on cost guidance and we expect gold production to be around $1.25 million ounces in the fourth quarter, with full-year production, therefore, at the lower end of the guidance range of 4.5 million to 5 million ounces. Similarly, we remain on track to meet our advised copper guidance of our Q2 results press results.

Our guidance for total capital expenditure remains unchanged with $950 million to $1.1 billion of sustaining capital and $450 million to $550 million of growth capital, for a total of $1.4 billion to $1.6 billion. We expect our full-year capital to now be at the low-end of our guidance range, mainly as a result of lower mine sites for sustaining CapEx. I'll now hand it over to Greg, who can take us through the Q3 operational details.

Greg Walker -- Senior Vice President of Operational and Technical Excellence

Thank you, Catherine. In the third quarter, we produced 1.15 million ounces of gold and sold 1.2 million ounces. As anticipated, gold production improved from the second quarter, primarily driven by better throughput and grade at Barrick Nevada.

This quarter over quarter production increase also reflects the completion of de-bottlenecking improvement at Pueblo Viejo. As a result, the audit class had daily throughout records in excess of design capacity. Gold costs for the quarter were in line with our guidance. The goal in sustaining the cost of $785.00 an ounce, our cash costs with $587.00 per ounce. Quarter over quarter, this represents a decrease of 8% and 3%, respectively.

As Catherine mentioned, quarter four gold production is expected to be approximately $1.25 million ounces. Although Fourmile production guidance is unchanged, we expect the 2018 production from Pueblo Viejo to be lower than lower and we have lowered the bottom end of range for our Barrick Nevada operations.

On the copper side, production increased quarter over quarter to 106 million pounds, driven by the steady improvement in grade, recovery, and crash reliability. Accordingly, proper costs decreased significantly from the second quarter in line with our guidance. Copper expanded costs of $2.71 per pound and the cash costs at $1.94 per pound in quarter three represents a decrease of 11% and 8% respectively over the period.

Also, I wanted to update you on our copper portfolio outlook. Firstly, the Zambian government has introduced an update for the mining tax regime with a proposal of January 1, 2019 effective date. The impact of this tax change would have a negative impact on cashflow from Lumwana. We are engaging with the Zambian government in an effort to mitigate some of this impact. We'll be able to update the market as discussions progress.

Secondly, we continue to see strong growth at our Jabal Sayid joint venture in Saudi Arabia. We saw a record throughput in the third quarter. As such, we intend to build on the strong record performance and we are currently studying options to improve Jabal Sayid throughput from 1.8 million tons per anum in 2018 to 2.6 tons per anum in 2021, an increase of almost 50%.

This project is designed to remove constraints at the plant for adding additional tailings and concentrate filtration, while optimized milling and floatation surface, with an estimated CapEx of approximately $40 million, we currently anticipate this project will generate an IRI greater than 15% at $2.75 per pound.

Moving to our pilot plant expansion at Pueblo Viejo, we continue to advance the strategic lease study on a plant expansion of where the increased throughput by 50%. This is designed to include the addition of a pre-oxidation heat release pad, a floatation process, along with additional grinding and [inaudible] capacity. On a 100% basis, this project continues to have the potential to bring roughly 7 million ounces of metered and indicated resource to proven and probable reserves.

This allows the maintain average gold production of approximately 800,000 ounces after 2022. We're pleased to announce that in support of this feasibility study, the pilot pre-oxidation heat leach is now in operation. As noted in the slides and the material, the material from Cell-1 has commenced processing and Cell-2 is being loaded with material where irrigation and oxidation are under way.

The construction of the pilot floatation circuit is well-advanced, including the holding tanks and the thickness. We're looking forward to providing further updates of our pilot testing as we advance the pre-feasibility study of this [inaudible].

With that, I would like to hand over to Henri, who will give us an update at Turquoise Ridge.

Henri Gonin -- General Manager, Turquoise Ridge

Thanks, Greg. As discussed last quarter, Turquoise Ridge is one of our emerging tier 1 mines. In recognition of its growth potential, which is facilitated by the construction of the third shaft. The construction of the shaft continues to advance according to schedule and within budget. Ground was broken on the shaft pipe during the third quarter and we are now taking delivery of waste components.

As you can see in the photographs, shaft winters have been delivered and fabrication of the shaft has commenced. The balance of 2018 will be focused on long lead time equipment purchases and [inaudible] excavation and also starting the headframe and the hoist installation.

As of September the 30th, we have spent $59 million out of the total estimated capital cost of $300 million to $325 million. The shaft is expected to increase annual production on a 100% basis to more than 500,000 ounces per year at a sustaining course of approximately $630.00 per ounce. Initial production from the new shaft is expected to begin in 2022 with sustained production starting in 2023.

Mine exploration has continued to expand the deposit in multiple directions, evolving in the high-grade results we reported in the last quarter. Recent asset results from the North Zone Getchell program include 16 meters driving 11.1 grams per ton, extending mineralization by 75 meters from the nearest oil body.

Earlier this year the Bas Pond East program extended mineralization to the Northeast by 120 meters and subsequent drilling has encountered significant grades, further extending that mineralization to the west by 55 meters, with intercepts riding 18.2 and 9.6 grams per ton. Drilling has also extended mineralization to the north by 35 meters within intercept of 3.8 meters grading at 13.9 grams per ton. Follow-up drilling in this area will continue for the remainder of this year and in 2019.

I will now hand over to Bill MacNevin to speak on the development progress at our Barrick Nevada projects.

Bill MacNevin -- Barrick Nevada CEO

Thanks Henri. At the Deep South project, we dug through to the mine with the [inaudible] last quarter. So, we've moved our focus to the west decline. Map excavation and preparation to install their materials handling conveyor system.

Our west decline is proceeding on schedule and the project is advancing to facilitate mining of the already permanent Cortez lower zone and to be ready to support Deep South mine development upon receipt of the permit.

Mining at Deep South is expected to result in production of approximately 300,000 ounces annually once fully ramped up between 2024 and 2028 with an expected cost of sales of approximately $650.00 per ounce. In July, the project received the Nevada state permits required for mining. Project permitting is advancing and the Draft EIS was published for public comment on October 22. We're working toward a record decision in the second half of 2019.

Goldrush is one of our most exciting projects and our development work on the project continues in terms of both exploration and construction. Barrick has had more drilling success at Red Hill in the nearby Fourmile area, which Rob Krcmarov will describe in a moment. We're continuing to develop development of the Goldrush exploration declines as pictured on the bottom right. We completed the total pad for the decline, access to Goldrush and we're currently taking rounds in advancing the decline.

The declines are on track to reach the oil body in 2021 when we will conduct further exploration and provide platforms to mine development. Our plan of operations to Goldrush mining project has been developed and we're working with our permitting agencies to formally initiate the efforts.

With that, I'd like to hand over to Rob to provide an update on our recent exploration results in Nevada.

Rob Krcmarov -- Executive Vice President of Exploration and Growth

Thanks, Bill. In February and April this year during investor day and the first quarter results call, a highlight is the high-grade gold mineralization intersected in Fourmile. Subsequently, for our Q2 results call, we released further extremely positive results on what we now call our discovery. This quarter, I'm not only happy to show you more very high-grade drill results and an expanding mineralization footprint at Fourmile, but also some very positive and encouraging results elsewhere in the Goldrush camp.

As we advance the resource to reserve drilling at Red Hill, which is basically the pride of Goldrush above the water table, and as we increase our understanding of the geology and mineralization controls of this outstanding oil body, it's become quite apparent that high-grade mineralization.

In some areas, he's associated with a series of west northwest structures. [Inaudible] targeting the westward projection of one of these structural trends, located approximately 250 meters away from the closest resource block. That returned an intercept of 3.5 meters at 9.3 grams per ton, indicating potential to grow the Goldrush resource base to the west. That's in close proximity to the exploration declines currently in development.

Stepping out a little, drilling at [inaudible], a target that was identified through a combination of really remarkable geological targeting and that included surface mapping, surface, chemistry, and state of the art structural interpretation from [inaudible] that's encountered a significant intercept in a location with virtually no drilling around it, us opening a new, very large search base for us. Let's have a look at the cross-section, A-A.

It's become apparent that the Sadler Fault forms a fault-propagated fold, which localizes high-grade mineralization at Fourmile and we believe that we may have identified another similar structure about 1 km with Fourmile. As I mentioned, through some thoughtful targeting, we intersected a very wide zone of favorable alteration and strong-geared chemistry, culminating in a mineralized intercept of 3.4 meters at 12.5 grams per ton and 1.4 meters at 60.9 grams per ton.

Very encouraging given that the nearest drill hole testing with structural trend is over 750 meters away. Moreover, in this isolated hole, the mineralization is not in the most favorable place. So, perhaps somewhere else along or near the Blasdel Fault will find even stronger mineralization, perhaps in the same silicate sulfide that make such an excellent host at Fourmile.

So, while it's early days, the results are encouraging and could develop into yet another successful story. In the meantime, we've added an extra rill to this area to scope out its continuity and potential and I am looking forward to updating you on this target in the future.

Looking at Fourmile third-quarter drill intercept highlights, results have been received for 30 holes year to date, 26 of those intersected significant mineralization for a really remarkably high success rate. Infill drilling continues to intersect very high-grade results, as can be seen in the middle of the slide.

I want to draw your attention to some of the excellent results we received this quarter from some of the step out holes. So, looking to the south or to the right of the slide, you can see highlights such as 39.3 meters at 25.6 grams per ton, as well as 25.9 meters at 34.6 grams per ton and 21.3 meters at 30.2 grams per ton.

At the other edge, to the left of the slide, we intersected 20.4 meters at 54.1 grams per ton gold from a very large step-out to the north, over 400 meters, in fact, from the edge of the main cluster of drilling, as well as a couple of other very high -grade intercepts from large step-outs to the west on the slide.

So, at Fourmile, you can see our siphon is not only the very high-grade, but also the expanding footprint, we are well on our way to providing an initial modest inferred resource at year end, a resource that we expect will continue to grow in subsequent years.

Moreover, it's clear that the Goldrush camp has significant untapped potential to yield additional bodies and hopefully be encouraging very early stage drill results at Blasdel will be a testament to that. This exciting area will continue to be a focus for years to come and these results highlight Nevada's role in Barrick's future.

With that, I'd like to hand it back to Catherine.

Catherine Raw -- Chief Financial Officer 

Thank you, Rob. That wraps up the presentation. Operator, let's open the call for Q&A. Thank you.

Questions and Answers:

Operator

Thank you. We will now begin the question and answer session. To join the question queue, you may press * then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press * then 2. We will pause for a moment as callers join the queue.

Our first question comes from John Bridges of J.P. Morgan.

John Bridges -- J.P. Morgan -- Analyst

Thanks, everybody. Thanks for taking the question. You must now be making some progress as to what the shape of the new company. I'm listening to John, I hear the tier one assets. I'm just remembering the plan for the earlier new month Barrick combination and the idea of spinning off a bunch of assets after that. Is there anything like that envisaged once the deal is completed?

John Thornton -- Executive Chairman

John, thanks for the question. The short answer is no. However, the more complete answer might be, as you will have gathered, we have identified nine core assets which we intend to sell. And of course, we're always guided by what's the best value we can receive. So, at any one point in time, before we actually execute on something, we would look at all the options and decide which one is in the best interest of the shareholders and then take that action.

John Bridges -- J.P. Morgan -- Analyst

Okay. Then perhaps as a follow-up, I see the [inaudible] project probably echo and remember from a much earlier slight visit that you were constrained by capacity. Any progress on getting some more tailings capacity because that's a big reserve there that is available if you can get the extra tailings capacity.

Greg Walker -- Senior Vice President of Operational and Technical Excellence

Thanks, John. It's Greg Walker. I'll answer that one. As I said in the presentation earlier on, advancing the expansion project, we've rolled tailings capacity pre-oxidation, and floatation into one project, combined expansion project. To bring those 7 million ounces in, we need to be able to process the tons and we need to process the capacity. So, we're advancing the what we call [inaudible] project. It's in early pre-feasibility and we're looking at that. So, the answer to your question is yes, we're expanding our tailings capacity.

John Bridges -- J.P. Morgan -- Analyst

Will that require some extra cost to buy the extra land or how do you see that going forward?

Greg Walker -- Senior Vice President of Operational and Technical Excellence

That capital is being defined at the moment and we haven't put our estimates into our plans going forward. You're right. It's not so much buying the land, getting access to the land, but it's also the construction of the dam as well.

John Bridges -- J.P. Morgan -- Analyst

Okay. Thanks, guys. Good luck.

Catherine Raw -- Chief Financial Officer 

Thanks, John.

Operator

Our next question comes from Greg Barnes of T.D. Securities.

Greg Barnes -- T.D. Securities -- Managing Director

Thank you. I was wondering if you could give us any kind of updated on the Acacia situation and the comments in the press recently about the potential of Barrick to take Acacia back in again.

Kevin Thomson -- Senior Executive Vice President of Strategic Matters

It's Kevin Thomson speaking. We can't comment on what may or may not happen with Acacia down the road. What we can tell you is we have had no discussions with Acacia, but a potential growing private transaction.

Greg Barnes -- T.D. Securities -- Managing Director

What about the status of discussions with the government in Tanzania?

Kevin Thomson -- Senior Executive Vice President of Strategic Matters

Discussions are ongoing. We had a team in Tanzania last week. The discussions have slowed down, but they are ongoing and we continue to be optimistic that we will get to the right place.

Greg Barnes -- T.D. Securities -- Managing Director

Any kind of timeframe you could provide?

Kevin Thomson -- Senior Executive Vice President of Strategic Matters

No.

Greg Barnes -- T.D. Securities -- Managing Director

Just a secondary question -- Catherine, it was mentioned the CapEx for the year will come in at the low end of the range on lower sustaining CapEx on the mine sites. Can you give us some more color around why that's happening?

Catherine Raw -- Chief Financial Officer 

Well, I can and then I'll ask Greg. So, when we look at sustaining, we spread it into pure sustaining, which is equipment purchases, tailings, etc. Then there's obviously stripping and development. So, what we're seeing is on the pure sustaining side, what we've seen effectively is a combination of rescope and execution, just meaning that that capital is not going to be spent. But maybe you can give a bit more detail on both sets.

Greg Walker -- Senior Vice President of Operational and Technical Excellence

Thanks. The sustaining capital is, as Catherine said, driven by two things -- execution of projects, another couple of our projects that have been delayed and therefore the capital spend is pushed out, so we've had a little bit of the scope and redefined and reduced the overall CapEx, also if you remember, [inaudible] early in the year, so they're behind on stripping in general and also at [inaudible] the stripping rate is down. So, those are two areas of reduced capital.

The negative capital combined in these developments. So, we're behind in development at Hemlo and at Goldstrike. So, that's also reduced our sustaining capital spend.

Greg Barnes -- T.D. Securities -- Managing Director

Okay. So, we're not seeing a lower systemic or lower CapEx. It's just various issues that have resulted in lower sustaining CapEx?

Greg Walker -- Senior Vice President of Operational and Technical Excellence

Yeah. There's been no conscious effort by the company to defer capital. It's simply been a couple of issues that have come up, as you see.

Greg Barnes -- T.D. Securities -- Managing Director

Great. Thank you.

Operator

Our next question comes from Tonya Jakusconek of Scotiabank.

Tanya Jakusconek-- Scotiabank -- Analyst

Great. Good morning, everybody. I just have a few questions. Maybe I'll start with the technical question for Greg. Greg, can you just review what's happening at Pueblo Viejo because it is a little bit of a disappointment this year in terms of how the mine has been operating.

I'm just trying to get an understanding of this carbonaceous material that we've been encountering. I understand that it's a new layback on the more pit. But were we expecting this? Maybe just an idea of how the grade in this area versus your block model has been coming out and are we getting out of it? I know recoveries are expected to improve, but just how is this progressing this year and next?

Greg Walker -- Senior Vice President of Operational and Technical Excellence

Thank you, Tanya, for the question. Personally, I'd say that Pueblo Viejo operationally is operating well. As I said in my presentation, they've had record throughputs in the order class. So, operationally they're going well, but as you rightly point out, the current area where mining [inaudible] two areas -- one is the carbonaceous material and secondly, underperformance of the grade against our model.

As you also pointed out, we're mining out of that area in the near future. What we have done is we've looked at the performance. We've looked at the model. We've taken those model, recovery, and grade issues, taken them into account for our fourth quarter. The grade of the fourth quarter will still be strong. It's with our 4 to 4.3 grams per ton range that we have set for the quarter, but it will be on the bottom end of that range.

So, we see it as a short-term localized area for the recovery and the grade. But once again, I'll reiterate that the operational performance of the mine is going well and they're getting good performance from their throughput.

Tanya Jakusconek-- Scotiabank -- Analyst

Were we expecting this carbonaceous material at all or was this a surprise?

Greg Walker -- Senior Vice President of Operational and Technical Excellence

Sorry, I missed that point of your question. We were expecting carbonaceous material, btu there was a greater quantity than we expected and the impact on recovery was more than usual. We encountered that material at different times as we mine through that level. But there was slightly more than we expected, but the impact was greater than has been historically. The process plan has made some modifications and we've looked at how we can blend that material and reduce the impact going forward.

Tanya Jakusconek-- Scotiabank -- Analyst

Okay. I think Goldcorp gave some guidance last night that the recovery was about 86% in Q3 and we're supposed to be going to 90% in Q4. Is that what you're envisioning?

Greg Walker -- Senior Vice President of Operational and Technical Excellence

We've got it between 89% and 90% correct.

Tanya Jakusconek-- Scotiabank -- Analyst

Okay. And then the grade is declining. I think they have it going a bit lower than four grams per ton. We're out of this area. So, into 2019?

Greg Walker -- Senior Vice President of Operational and Technical Excellence

Just to answer your question on the grade -- we've completely drilled our fourth quarter mining for Pueblo Viejo. We've estimated a relatively conservative estimate that will be just over 4 grams per ton. So, we've got high confidence of that number.

Tanya Jakusconek-- Scotiabank -- Analyst

Okay. We're out of the material?

Greg Walker -- Senior Vice President of Operational and Technical Excellence

We will be into next year, yes.

Tanya Jakusconek-- Scotiabank -- Analyst

End of next year. Okay.

Greg Walker -- Senior Vice President of Operational and Technical Excellence

No, no, at the end of this year, we will be by the end of the quarter.

Tanya Jakusconek-- Scotiabank -- Analyst

Okay. Thank you. Maybe just two other questions, if I could -- coming back on Acacia -- maybe, Kevin, you can tell us, it's taking a bit longer than we all expected. What are some of the points of contention that we're dealing with, just a bit of clarity on what the negotiations are focused on?

Kevin Thomson -- Senior Executive Vice President of Strategic Matters

Tanya, I'd love to get into the specifics, but I can't do that. I apologize.

Tanya Jakusconek-- Scotiabank -- Analyst

Okay. Maybe I'll move on to the copper asset. Maybe for John -- I think on your townhall, you mentioned the copper assets were core to Barrick and not with the merger with Rangold, I seem to have heard in the market that maybe Lumwana may not be core. Can you give us an idea of what the proper assets are in the new co?

Greg Walker -- Senior Vice President of Operational and Technical Excellence

Yes. First of all, I don't think I ever said they were core. I think I said they were strategic. What I meant by that at the time and still pertains is that as you can appreciate, copper is a strategic mineral, very much in the focus of the Chinese and others around the world. So, the question for us going forward is given that we're in copper, how do we treat that in the future. I think where we're headed is on the one side of the coin, we accept and recognize we'll always shave copper in the portfolio insofar as proper gold appears together in many parts of the Western Americas.

Secondly, the question still to be addressed is over time, how do we take our copper assets and use them to our both financial and strategic advantage with potential partners around the world who may want to build serious copper companies which we might have an economic interest that would be attractive to us and also can be used, for that matter, in respect of trading for gold vessels.

So, both our partners in Saudi Arabia and our partners in China, this is of high interest to them. So, we're engaged with both of them, what you might call sort of slow motion long-term conversations about how to maximize the value of things to to them and to us.

Tanya Jakusconek-- Scotiabank -- Analyst

Okay. They could be used for other assets. Okay. Thank you.

Catherine Raw -- Chief Financial Officer 

Tanya, just because there are analyst types out there saying certain things about copper, it doesn't necessarily mean that's what we're saying. I think that may be where some of this confusion is come from.

Tanya Jakusconek-- Scotiabank -- Analyst

Okay. Thank you. I wasn't at the meeting, so I just hear the chatter. Thanks.

Operator

Our next question comes from Kerry Smith of Haywood Securities.

Kerry Smith -- Haywood Securities -- Managing Director

Thanks operator. Catherine, maybe just on the G&A guidance at $235 million, which includes this $36 million of severance. Is there any severance that would roll into 2019 or will it all be cleaned up this year and we could look at a $200 million run rate next year for your corporate G&A?

Catherine Raw -- Chief Financial Officer 

So, obviously, that's a rather complicated question, given what's in theory supposed to happen post the 5th of November. But in terms of the decentralization efforts of Barrick, our intention is to have completed these by the end of the year. In terms of the productions, the exits, that would be by the end of the year. So, if there is any rollover, it will be minor and it would be really only into Q1. But that is based upon the work that really began in earnest in March/April of this year. The plans that we had in place and the execution of those plans over this 2018 period.

So, clearly in terms of the transaction and understanding what the new company looks like, I can't really comment on what the G&A is going to be for next year and that's the work we'll be doing between November the 5th and the end of the year.

Kerry Smith -- Haywood Securities -- Managing Director

Right. Okay. I understand. Perhaps somebody could give me a sense for the EIS that's been filed for Deep South. How many comments have you got as it relates to that document or what has been the tone and the tenor of those comments?

Catherine Raw -- Chief Financial Officer 

Okay. So, we're still in the comment period, so therefore, we can't really comment on the fact that we're still in the comment period. So, why don't we circle back to that question maybe next question and we can give you a bit more detail then, OK?

Kerry Smith -- Haywood Securities -- Managing Director

Sure. That's fine. Then the third question is for Rob, just on this Blasdel discovery, this one hole, you were saying it's in a different unit. Is it in a unit that actually sits above the mineralized envelope at Fourmile/Goldrush that might sort of open up some new exploration targets for you? How does it relate lithologically to what you see at Fourmile and Goldrush?

Rob Krcmarov -- Executive Vice President of Exploration and Growth

So, Kerry, looking at the cross-section, it's actually in the stratigraphic unit below that at Fourmile. So, given that it's a one-off isolated hole that's a long way from the nearest hole, 700 meters, we don't know where along the Blasdel fault the optimum position is. So, hopefully the prime lithological structure will be mineralizing that area there, but what is encouraging is there is a system that's operating a long way away from Fourmile and really, the challenge now is to find out where is the focus of that system?

Kerry Smith -- Haywood Securities -- Managing Director

Right. Okay. And how many holes do you think you'll be able to drill in that new area between now and then end of the year? It looks like they're thousand-meter holes anymore.

Rob Krcmarov -- Executive Vice President of Exploration and Growth

I think we'll have hopefully three holes by the end of this year.

Kerry Smith -- Haywood Securities -- Managing Director

Right. So, that would be three incremental holes to the one you have then, Rob?

Rob Krcmarov -- Executive Vice President of Exploration and Growth

I think so.

Kerry Smith -- Haywood Securities -- Managing Director

Great. Perfect. Thanks a lot. I appreciate it.

Operator

Once again, if you have a question, please press * then 1. Our net question comes from Carey MacRury of Canaccord Genuity.

Carey MacRury -- Canaccord Genuity Corp. -- Analyst

Just a question on Nevada. Clearly, you're having a lot of exploration success there and I know you're looking at increasing processing capacity. I'm just wondering a) what the timeline looks like on when those studies will be complete and when you think you can make a decision. Secondly, if you do make a positive decision, what's a theoretical timeline to permit and construct that?

Catherine Raw -- Chief Financial Officer 

Bill, do you want to comment on that and then I can give the corporate polish afterwards?

Bill MacNevin -- Barrick Nevada CEO

We're in the middle of our PFS study that's going extremely well. A lot of work, obviously, on the engineering side of things. We're also doing considerable work to understand the nuances of the permitting processes that would be required to go forward. Essentially, what we're doing is we're putting together our PFS. In the first half of next year, we'll present that and then we'll make a decision on the next steps.

Catherine Raw -- Chief Financial Officer 

Just to support that, this is something we're treading carefully around, making sure we understand exactly all of the implications given the complexity of everything that's going on Nevada at the moment, as well also understanding the geology and sources because obviously, with this drilling of Fourmile and good results out of Goldrush, we have to do that in parallel in order to properly understand the value proposition that this can give us.

So, that's really making us move relatively carefully over this whole thing. This is really a 2019 and I would say second half of 2019 based upon current timing. So, don't hold me to that in the future. But that will be when we can provide a little more insight into all of this. We'll keep asking those questions and giving you detail until then.

Carey MacRury -- Canaccord Genuity Corp. -- Analyst

Is there any sense of how big an expansion we're looking at or is there a range of options you're looking at there?

Catherine Raw -- Chief Financial Officer 

If we were going to talk about it we will put that in our formal documentation of press releases and presentations and things. So, the fact that we haven't done that yet means that we don't want to talk about it quite yet. So, maybe leave that one until year-end, OK?

Carey MacRury -- Canaccord Genuity Corp. -- Analyst

Okay. Thank you.

Operator

Our next question comes from Mike Parkin of National Bank.

Mike Parkin -- National Bank -- Analyst

I was wondering if you could make a comment on the competition for labor in your Nevada operations. We've heard from a couple guys up there looking to recruit out of that state for skilled workers due to challenges of kind of a very full employment environment and some of the other operations in the state. Are you finding pressure for your labor showing up more than it has historically?

Catherine Raw -- Chief Financial Officer 

Bill, I think this one is for you?

Bill MacNevin -- Barrick Nevada CEO

I think not just in Nevada, the whole US is a tight labor market. We've been preparing ourselves for that for several years. So, we do a lot of work on pipelining and developing our own internal talent as well as looking proactively ahead. It is a tight market, but we're meeting our needs by being very proactively and particularly about putting time and effort into developing the pipeline.

We've got an amazing group of young professionals, but within our team at present as well as what we're engaging with the universities and others and bringing through. So, we believe we're in the middle of a cycle that's going to extend for a while like this. So, we're making sure we're being proactive about it. We're meeting our needs.

Mike Parkin -- National Bank -- Analyst

Thanks very much.

Operator

We have no further questions registered at this time. This concludes the question and answer session. I would like to turn the conference back over to Catherine Raw.

Catherine Raw -- Chief Financial Officer 

Okay. Thank you, Operator and thank you all for dialing in and have a good day. That concludes today's conference call.

Duration: 46 minutes

Call participants:

Catherine Raw -- Chief Financial Officer 

John Thornton -- Executive Chairman

Greg Walker -- Senior Vice President of Operational and Technical Excellence

Henri Gonin -- General Manager, Turquoise Ridge

Kevin Thomson -- Senior Executive Vice President of Strategic Matters

Bill MacNevin -- Barrick Nevada CEO

Rob Krcmarov -- Executive Vice President of Exploration and Growth

John Bridges -- J.P. Morgan -- Analyst

Greg Barnes -- T.D. Securities -- Managing Director

Tanya Jakusconek-- Scotiabank -- Analyst

Kerry Smith -- Haywood Securities -- Managing Director

Carey MacRury -- Canaccord Genuity Corp. -- Analyst

Mike Parkin -- National Bank -- Analyst

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