**Exhibit 99.4**

 

Management’s Discussion andAnalysis (“MD&A”)

 

Management’s Discussion andAnalysis (“MD&A”) is intended to help the reader understand Barrick GoldCorporation (“Barrick”, “we”, “our” or the “Company”), our operations,financial performance and present and future business environment. ThisMD&A, which has been prepared as of February 19, 2009, should be readin conjunction with our unaudited consolidated financial statements for theyear ended December 31, 2008. Unless otherwise indicated, all amounts arepresented in US dollars.

 

Forthe purposes of preparing our MD&A, we consider the materiality ofinformation. Information is considered material if: (i) such informationresults in, or would reasonably be expected to result in, a significant changein the market price or value of our shares; or (ii) there is a substantiallikelihood that a reasonable investor would consider it important in making aninvestment decision; or (iii) if it would significantly alter the totalmix of information available to investors. We evaluate materiality withreference to all relevant circumstances, including potential marketsensitivity.

 

Continuousdisclosure materials, including our most recent Form 40-F/AnnualInformation Form, annual MD&A, audited consolidated financial statements,and Notice of Annual Meeting of Shareholders and Proxy Circular will beavailable on our website at www.barrick.com, on SEDAR at www.sedar.com and onEDGAR at www.sec.gov. For an explanation of terminology unique to the miningindustry, readers should refer to the glossary on page 77.

 

**CautionaryStatement on Forward-Looking Information**

 

Certain informationcontained or incorporated by reference in this MD&A, including anyinformation as to our strategy, plans or future financial or operatingperformance, constitutes “forward-looking statements”. All statements, otherthan statements of historical fact, are forward-looking statements. The words “believe”,“expect”, “anticipate”, “contemplate”, “target”, “plan”, “intend”, “continue”, “budget”,“estimate”, “may”, “will”, “schedule” and similar expressions identifyforward-looking statements. Forward-looking statements are necessarily basedupon a number of estimates and assumptions that, while considered reasonable byus, are inherently subject to significant business, economic and competitiveuncertainties and contingencies. Known and unknown factors could cause actualresults to differ materially from those projected in the forward-lookingstatements. Such factors include, but are not limited to: the impact of globalliquidity and credit availability on the timing of cash flows and the values ofassets and liabilities based on projected future cash flows; fluctuations inthe currency markets (such as Canadian and Australian dollars, South Africanrand, Chilean peso, Argentinean peso, Peruvian sol and Papua New Guinean kinaversus US dollar); fluctuations in the spot and forward price of gold andcopper or certain other commodities (such as silver, diesel fuel andelectricity); changes in US dollar interest rates or gold lease rates thatcould impact the mark-to-market value of outstanding derivative instruments andongoing payments/receipts under interest rate swaps and variable rate debtobligations; risks arising from holding derivative instruments (such as creditrisk, market liquidity risk and mark-to-market risk); changes in national andlocal government legislation, taxation, controls, regulations and political oreconomic developments in Canada, the United States, Dominican Republic,Australia, Papua New Guinea, Chile, Peru, Argentina, South Africa, Tanzania,Russia, Pakistan or Barbados or other countries in which we do or may carry onbusiness in the future; business opportunities that may be presented to, orpursued by, us; our ability to successfully integrate acquisitions; operatingor technical difficulties in connection with mining or development activities;employee relations; availability and

 

24

----

 

increased costs associated withmining inputs and labor; litigation; the speculative nature of exploration anddevelopment, including the risks of obtaining necessary licenses and permits;diminishing quantities or grades of reserves; adverse changes in our creditrating; and contests over title to properties, particularly title toundeveloped properties. In addition, there are risks and hazards associatedwith the business of exploration, development and mining, includingenvironmental hazards, industrial accidents, unusual or unexpected formations,pressures, cave-ins, flooding and gold bullion or copper cathode losses (andthe risk of inadequate insurance, or inability to obtain insurance, to coverthese risks). Many of these uncertainties and contingencies can affect ouractual results and could cause actual results to differ materially from thoseexpressed or implied in any forward-looking statements made by, or on behalfof, us. Readers are cautioned that forward-looking statements are notguarantees of future performance. All of the forward-looking statements made inthis MD&A are qualified by these cautionary statements. Specific referenceis made to Barrick’s most recent Form 40-F/Annual Information Form onfile with the SEC and Canadian provincial securities regulatory authorities fora discussion of some of the factors underlying forward-looking statements. Wedisclaim any intention or obligation to update or revise any forward-lookingstatements whether as a result of new information, future events or otherwise,except to the extent required by applicable law.

 
| **Index**  |
|------------|
| ** ** |
| 26         | **Core  Business, Enterprise Strategy and Our Ability to Deliver Results** |
|       | Provides an overview of  Barrick and outlines our core business, critical success factors, key  performance indicators for our business, our performance in relation to our  2008 strategic objectives, our 2009 strategic objectives, and our key  strengths and competencies. |
|       |   |
| 31         | **Market  Overview and 2008 Financial and Operational Results** |
|       | Provides a review of the  overall market trends within the industry, reviews Barrick’s consolidated  financial performance, including significant factors affecting income and  cash flow. It also includes a review of our regional operating performance in  2008 along with an update on key projects. |
|       | 31            Market Overview |
|       | 36            Financial Overview

39            Operational Overview

40            Reserves

41            Key Business Transactions

41            Operating Segments Review |
|       |   |
| 47         | **Review of  Significant Operating Expenses** |
|       | Provides analytics for  variances for our significant operating expenditures. |
|       |   |
| 50         | **Financial  Outlook** |
|       | Provides our 2009 forecast  for key financial and operational performance measures, significant  underlying assumptions, and economic sensitivities for some of these key  assumptions. |
|       |   |
| 52         | **Review of  Quarterly Result** |
|       | Provides a review of our  consolidated financial performance in the fourth quarter, summarizes our  results on a quarter by quarter basis, and includes an analysis of key  factors impacting quarter to quarter performance. |
|       |   |
| 53         | **Financial  Condition Review** |
|       | Reviews our cash flow,  balance sheet, credit rating and our approach to managing our capital  position and capital resources to support our business objectives. It also  discusses our contractual obligations, off balance sheet arrangements and  financial instruments as at the end of 2008. |
|       |   |
| 62         | **Critical  Accounting Policies and Estimates**

Summarizes key changes in  accounting policies in 2008 and for future periods, analyzes critical  accounting estimates, our internal controls over financial reporting,  disclosure controls and procedures, and information on our conversion to  IFRS. |
|       |   |
| 72         | **Non-GAAP  Financial Measures** |
|       | Includes descriptions of  the various non-GAAP financial performance measures used by management, the  reasons for their usage and a tabular reconciliation of these measures to the  closest equivalent US GAAP measure. |
|       |   |
| 77         | **Glossary  of Technical Terms** |
|       | Explanation of terminology  used in our MD&A that is unique to the mining industry. |

 

25

----

 

**Changes inDefinitions of Non-GAAP Measures**

 

We use certain non-GAAPfinancial measures in our MD&A. In this MD&A, we have changed thedefinition of “adjusted net income”, “total cash costs”, “EBITDA”, “realizedprice” and “cash margin”. For a description of the change in the definition of (a) adjustednet income, please see pages 72 and 73, (b) total cash costs, please seepages 38 and 73 to 74, (c) EBITDA, please see page 75, (d) realizedprice, please see pages 75 to 76, and (e) cash margin, please see page 76.For a detailed discussion of each of the non-GAAP measures used in ourMD&A, please see the discussion under “Non-GAAP Financial PerformanceMeasures” beginning on page 72 of our MD&A.

 

**CoreBusiness, Enterprise Strategy and our Ability to Deliver Results**

 

**Our Vision**

 

To be the world’s best goldmining company by finding, acquiring, developing and producing quality reservesin a safe, profitable and socially responsible manner.

 

**OurBusiness**

 

Governed by our five corevalues; behave like an owner, act with a sense of urgency, be a team player,continually improve, and deliver results, we have become the world’s preeminentgold mining company. Our annual gold production and gold reserves are thelargest in the industry. We also produce significant amounts of copper at someof our operating mines. We sell our production in the world market throughthree primary distribution channels: gold bullion is sold in the gold spotmarket; gold and copper concentrate is sold to independent smelting companies;and copper cathode is sold under copper cathode sales contracts with variousthird parties.

 

**OurStrategy**

 

To increase total returnsfor our shareholders, we aim to increase earnings and operating cash flow andto provide leverage to gold prices through annual gold production and growingour reserve/resource base through a combination of organic growth, driven bynew mineral reserve discoveries and the development of new projects, and alsothrough acquisitions. Our profitability is largely dependent upon the volume ofgold and copper production, realized prices of gold and copper and productioncosts. As gold prices have risen in recent years, we have been able to realizehigher cash margins per ounce through containment of production costs. Althoughgold production has seen a declining trend in the past three years, we intendto increase production levels through the development of new mines and alsothrough acquisitions.

 

Buildingnew mines is key to our long term goal of increasing profitability and buildingshareholder value. It can take a number of years for a project to move from theexploration stage through to mine construction and production. Our businessstrategy reflects this long lead time by ensuring that we have an inventory ofprojects combined with effective management of current operating mines.

 

26

----

 

Theprojects in our inventory are at various stages of development, ranging fromscoping to feasibility to construction. Three projects are at an advancedstage, namely Buzwagi, Cortez Hills and Pueblo Viejo. We are confident that wehave the managerial team and resources to successfully bring these advancedprojects into production. These projects will require substantial upfrontcapital that we expect to fund from a combination of future operating cash flowand new financings. We expect that these three new mines will operate at loweraverage total cash costs than the average total cash costs of our currentportfolio of operating mines. We also expect these new mines will report higheramortization than our current portfolio, reflecting the high capital cost ofbuilding new mines in today’s economic environment. The other projects in ourinventory include both gold and non-gold projects at various stages offeasibility. In light of today’s low price environment for other metals, ourprimary focus is on projects with a significant gold component. A decision toproceed with other projects will depend upon numerous factors, but particularlythe expected economic returns on the project and the cost and availability offinancing.

 

Acquisitionshave always been an integral part of our growth strategy. In 2006, we acquiredPlacer Dome Inc., one of the world’s largest gold mining companies. In 2007, wecontinued to expand our projects through the acquisition of a 51% interest inthe Cerro Casale copper-gold deposit in Chile, and a package of explorationlicenses in Papua New Guinea from Highlands Pacific. We also increased ourinterest in the Porgera mine from 75% to 95%. In 2008, we increased our ownershipin the Cortez mine and Cortez Hills project from 60% to 100%.

 

 

**KeyStrategic Performance**

 

In 2008, our strategictargets focused on share price performance, creating a high performanceorganization, responsible mining, advancing our inventory of projects andmeeting our financial and operating targets with a focus on core areas such asproduction, cost control, and increasing reserves. Our successes in each ofthese areas have laid the foundation for our 2009 key areas of focus: shareprice performance, growth, financial strength and flexibility, operationalexcellence, respect for our people, ensuring our license to operate andcontinuing to build and maintain a high performance organization.

 

27

----

 

**Strategic Performance and 2009 Stategic Objectives**

 
| **2008 Strategic Objectives**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | ** ** | **Performance**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | ** ** | **Key  2009 Strategic Objectives**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| **Operational Excellence**

·        Meet guidance for production and total cash costs

·        Excellent financial management in areas of financial risk management,  financial reporting, cost control and investor communications

**Growth**

·        Continue to focus on exploration to find new gold reserves and  resources

·        Expanding the role of R&D to add value to our existing operations

**·****      **Targeted  acquisitions to strengthen operational base

**Capital Management and Projects**

**·****      **Effective  capital allocation through prioritization  and sequencing of projects

·        Projects built on-time and on-budget

·        Address long-term energy needs and explore alternative energy projects | ** ** | ·        Met guidance for gold production and met revised total cash cost  guidance

·        Continued our emphasis on cost controls, supply security and supplier  development

·        Increased gold reserves by 11% to 138.5 million ounces and increased  gold resources by 29% to 65.0 million ounces

·        Moving into the execution phase of our internet based “Unlock the  Value” program which is aimed at enhancing the recovery of the silver content  of our Veladero deposit located in Argentina

·        Acquired additional 40% of Cortez to consolidate 100% interest

**·****      **Buzwagi  construction on schedule and within budget with production expected in  mid-2009.

·        Cortez Hills regulatory approval obtained to allow commencement of construction and  pre-stripping

·        Pueblo Viejo construction activity commenced

·        Acquired Barrick Energy as part of a long term strategy to contain the cost of oil  consumption | ** ** | **Operational  Excellence**

·        Meet or improve upon operational guidance

·        Intense focus on capital efficiency and allocation of capital

·        Deliver projects on time and on budget

·        Manage financial and commodity exposures

**Growth**

**·****      **Focus  on reserve/resource growth through a combination of new discoveries and acquisitions

**Enhance  Financial Strength and Flexibility**

**·****      **Maintain  investment grade credit ratings

**·****      **Ensure  credibility with shareholders by delivering  on guidance and providing high-quality  continuous communication 

**·****      **Ensure  access to capital markets |
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | ** ** |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| **High Performance Organization**

·        Strengthen leadership through sustained training and support for our people

·        Continue building culture focused on our values, innovation and open communication

·        Enhanced people management to be the employer of choice by attracting, motivating and retaining top people in competitive markets

·        Support the business by developing robust infrastructure, standardizing and streamlining business processes                                                                                                                                                                                                                                                                                                                                                                                                                                  | ** ** | ·        Continued Business Process Improvement program and implementation of  standardized technology solutions  and business processes across the company  

·        Developed and implemented Compass, a set of learning and development programs for early  stage professionals, in each of  our technical mining disciplines                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | ** ** | **High  Performance Organization**

·        Maintain entrepreneurial culture

·        Enhance employee ownership and accountability

·        Reward and recognize bold leadership

·        Focus and simplify work practices                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | ** ** |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| **Responsible Mining**

·        Effective community and government relations that work to strengthen relationships with the communities around our operations

·        Environmental leadership on climate change, water management, energy management and International Cyanide Management Code implementation

**Innovation**

**·****      **Focus  on innovation, through R&D efforts,  to increase recovery, improve ore characterization, reduce energy equirements and improve plant design  

·        Using technology as an enabler to develop strategy, increase automation and remote management at our mines                                                                                                                                                                                                                                                                                              | ** ** | ·       Improved our safety record with fewer lost-time and total incidents

·       Over 20,000 people trained in Courageous Safety and Leadership to date

·       A Community Relations Leadership Team was established and played a key role in the  development of a strategy to  strengthen relationships with communities  around our operations

·       We established a climate change policy and program during the year and  have completed the company’s first  carbon profile and are engaged in a risk assessment to guide our efforts in the future.

·       Voluntary application of the International Cyanide Management Code, which establishes strict  guidelines for the safe  management of cyanide in mining. Fourteen  Barrick mines have been formally certified under the Code, with a further five mines on track for certification in 2009                                                                                                                                                                                                                                                                                                           | ** ** | **Respect  our People**

·       “Every person going home safe and healthy every day”

·       Personal development and career advancement of our employees  

·       Continuously recognize the achievements of our people

**Ensure License to Operate**

**·****     **Welcomed  partner of communities and government

·       Effective environmental stewardship  

·       Compliance with regulatory standards                                                                                                                                                                                                                                                                                                                                                      |

 

28

----

 

**Capabilityto Execute our Strategy**

 

Our capability to executeour financial and operational strategy comes from the strength of ourexperienced management team, skilled workforce and organizational structure, astrong inventory of projects that facilitates the long-term sustainability ofour business, our strong research and development group, our strong financialposition and our commitment to achieving high standards in terms ofenvironmental, health and safety performance.

 

**ExperiencedManagement Team, Skilled Workforce and Organizational Structure**

 

We have an experiencedmanagement team with a proven track record in the mining industry. Strongleadership and governance are critical to the successful implementation of ourcore business strategies.

 

Wemanage our business using a regional business unit (“RBU”) structure. We havefour RBUs, each of which is led by its own Regional President: North America,South America, Australia Pacific, and Africa. Each RBU operates as a standalonebusiness unit with a range of functional groups. Since their inception, theRBUs have added value to our business by realizing operational efficiencies inthe region, allocating resources more effectively and understanding and bettermanaging the local business environment, including labor, consumable costs andsupply and government and community relations.

 

Askilled workforce has a significant impact on the efficiency and effectivenessof our operations. The remote nature of many of our mine sites presents somechallenges in maintaining a well-trained and skilled workforce. As a result, wecontinue to focus on training and development for key members of our seniormine management, technical professionals and frontline workers through our talentmanagement processes and enhanced distance learning programs and e-learningtechnologies. We have also expanded our technical training and developmentprograms to include all of our technical mining disciplines (mining,metallurgy, maintenance and geology). This program is now improving thetechnical and leadership skills of over 300 professionals.

 

Inaddition, we have a Continuous Improvement (“CI”) group that is focused onimproving operational excellence. An ongoing focus for the CI group continues tobe the identification of cost reduction opportunities, through processimprovements, better utilization of plant and equipment and metallurgicalrecovery improvements to increase production rates and lower costs.

 

**AdvancedExploration and Project Development**

 

Our inventory of advancedexploration targets and development projects represents an important componentof our long-term strategy of growing our reserves and resources. Ourexploration is focused on prospective land positions and we prioritize explorationtargets to optimize the investment in our exploration programs. An economicdiscovery is no longer a guarantee of a new mine, as considerable opposition tonew mining projects can develop from institutional NGOs or unstable politicalclimates. The development of a new mine requires successful permitting andgovernment relations, community dialogue and engagement, and significantfinancial and human capital. As a result of these factors, the timeline andcost of developing projects has increased significantly. In 2008, we formed adedicated Capital Projects group to focus on managing large projects andbuilding new mines. This specialized group manages all project activities up toand including the commissioning of new mines, at which point responsibility formine operations is handed over to the RBUs.

 

**Researchand Development**

 

Our research and development(“R&D”) group is supported by an in-house Technology Center located inVancouver, and supports both operations and projects. In 2009, we are movinginto the execution phase of our internet-based “Unlock the Value” program whichis aimed at enhancing the recovery of the silver content of our Veladerodeposit located in Argentina. The silver recovery program for the Pueblo Viejoproject also has increased expected recoveries significantly from the formerPlacer Dome feasibility work.

 

29

----

 

**FinancialStrength**

 

The current global economiccrisis has underlined the importance of maintaining adequate levels of liquidityand a strong balance sheet. We actively manage our liquidity by focusing onmaintaining and growing operating cash flow, effective capital allocation andprioritization of capital projects, and putting in place financing, whenappropriate, for our capital needs.

 

**Environmental,Health and Safety**

 

Safeguarding the environmentis critical to our social license to operate. In mining, water and energyconservation are also a critical part of the environmental equation. Our newGlobal Water Conservation Standard has been finalized and is now beingimplemented as a company-wide priority. All 27 Barrick mines have conductedenergy self-assessments and are working toward greater energy efficiency andconservation.

 

OurEnvironmental Management System continues to garner recognition. Most recently,our Ruby Hill mine in Nevada won the prestigious federal Bureau of LandManagement award for its environmental management and concurrent reclamationpractices. In Argentina, a pioneering wetlands rehabilitation program near ourVeladero mine was recognized internationally by the industry association OLAMI(Organizacion Latinoamericana de Minería).

 

Wealso announced a $30 million expansion of the Punta Colorado wind farm projectnear Pascua-Lama in Chile, increasing our investment to $70 million andgenerating capacity from 20 to 36 megawatts. This brings the company’s totalinvestment in renewable energy projects to $98 million to date, including ahigh altitude wind turbine near our Veladero mine in Argentina and solar powerin Nevada. In 2008, we also became the first mining company to join theInternational Leadership Council of the Nature Conservancy, the world’s largestconservation organization.

 

Webelieve that the health and safety of our workers is fundamental to ourbusiness. Our vision is: “Every person going home safe and healthy every day”.We are committed to the identification, elimination or control of workplacehazards for the protection of ourselves and others. Our long-term goal is to bea zero incident company.

 

Forus to succeed in fulfilling this goal, we are working to: 

 

·        Provide the expertise and resources needed to maintain safe and healthyworking environments

·        Establish clearly defined safety and occupational health programs andmeasure safety and health performance, making improvements as warranted

·        Operate in accordance with recognized industry standards, whilecomplying with applicable regulations

·        Investigate the causes of accidents and incidents and develop effectivepreventative and remedial action

·        Train employees to carry out their jobs safely and productively

·        Maintain a high degree of emergency preparedness.

·        Require that vendors and contractors comply with our applicable safetyand health standards.

 

30

----

 

**MarketOverview and 2008 Financial and Operational Results**

 

**MarketOverview**

 

In 2008, the global economyexperienced a tumultuous year, as many commodity prices and stock marketindices reached all-time highs. Gold reached an all-time high of $1,032 perounce in 2008, and copper reached a high of $4.06 per pound in 2008. Commodityprices declined precipitously during the latter half of the year as globalcredit markets seized up, investor confidence plummeted and many economies enteredrecession. The decrease in bank liquidity and the resulting credit crisis ledto some high profile bank failures and other near failures. These developmentshad a pervasive impact on virtually all industries through the devaluation ofglobal equities and commodities; increased volatility in global equities,commodities, foreign exchange and precious metals markets; deterioration in thecredit ratings of a number of large financial institutions; decreases in marketliquidity and unwinding of levered trades by hedge funds; intervention bygovernments and central banks in the marketplace; and a general slowdown inglobal economic activity. Although gold prices retreated to a low of $682 perounce in 2008, market prices have since increased as investors have looked togold as a safe haven, with recent prices in the range of $950 to $975 perounce. These developments have had, and we expect will continue to have, asignificant impact on our business. In particular:

 

·        Volatility in gold prices leads to volatility in our revenues, earningsand cash flow.

·        Lower copper prices impact the revenues and cash flow generated by ourcopper production and the potential returns on projects containing significantquantities of copper such as Cerro Casale and Reko Diq. Our copper hedgeposition largely economically protects us from lower copper prices in 2009, butbeyond 2009 we are dependent on market copper prices.

·        Lower energy prices, commodity and consumables prices and currencyexchange rates should benefit our production costs in the medium to long term.In the short term, our currency and energy hedge positions will result inhigher prices than current market rates, delaying the realization of benefitsto production costs.

·        Lower silver, platinum group metals, nickel and copper prices wouldimpact the economics of capital projects containing significant quantities ofthese metals, such as Pascua-Lama, Sedibelo, Fedorova, Kabanga, Cerro Casaleand Reko Diq.

·        The global credit/liquidity crisis is impacting the cost andavailability of new financing.

 

In response to these conditions we have taken a number of actions,including:

 

·        A critical review of spending to contain costs;

·        An extensive review of sustaining capital expenditures to prioritizeallocations of capital; and

·        Focusing on advancing our near term gold projects (Buzwagi, CortezHills and Pueblo Viejo) to optimize returns and cash flow.

 

Although current economicand credit conditions create many challenges and risks, a continuation of thetrend of higher gold prices, if gold maintains its appeal as a safe haven,could enable us to increase cash margins from gold sales and operating cashflow from our current portfolio of operating mines. At the same time there isrisk that a decline in gold prices could also occur.

 

**MineralMarkets**

* *

*Gold*

 

The market price of gold isone of the most significant factors in determining the profitability of Barrick’soperations(1). The price of goldis subject to volatile price movements over short periods of time, especiallyin the current market environment, and is affected by numerous industry andmacroeconomic factors that are beyond our control. Gold price volatilityincreased significantly compared to 2007, and the price ranged from $682 to$1,032 per ounce in 2008, with an average market price of $872 per ounce. Goldstrongly outperformed all other major commodities in 2008 as it benefited fromsafe-haven flows during the financial crisis. However, safe-haven flows weresubsequently outweighed by US dollar strengthening and a general deleveragingof balance sheets across the globe, which resulted in gold trading as low as$682 per ounce in November, after reaching over $1,000 per

 

----

(1)          Referto our financial outlook section in this MD&A for an illustration of thesensitivity of our revenues to movements in the gold price.

 

31

----

 

ounce in March. By year end,gold was trading at $870 per ounce due to less speculative selling and stronginvestment demand from Exchange Traded Funds (“ETFs”) and coin sales.

 

Webelieve that the uncertainty in the global financial markets, the amount ofmonetary stimulus being injected into the global economy, possible inflationarypressures in the medium term from an exceptionally low interest rateenvironment, the possibility of currency revaluations, including US dollardepreciation, and a sharp increase in government spending in response to thefinancial crisis are all supportive of higher gold prices in 2009 if suchtrends continue.

 

Webelieve the outlook for mine production from all gold mining companies over thenext 5 to 10 years, which currently represents over 60% of total global supply,is one of gradual decline. The primary drivers for the global decline are atrend of lower grade production by many producers; increasing delays andimpediments in bringing projects – especially large-scale projects – to theproduction stage; inflationary pressures on capital costs which havesubsequently eased, but have been replaced by global financing conditions thatconstrain the ability of mining companies to finance projects; a lack of globalexploration success in recent years; and a dearth of new, promising regions forgold exploration and production. A decrease in global industry productionincreases the potential for increases in the sustainable long term gold price.

 

 

*Copper*

 

London Metals Exchange (“LME”)copper prices traded in a range of $1.28 to $4.06 per pound in 2008, andaveraged $3.15 per pound for the year. Our realized price of $3.39 in 2008exceeded LME spot prices due to the impact of our copper hedging program. In2008, copper prices reached all-time highs before suffering large declinesthrough the end of 2008, due to the global economic slowdown. Future copperprices should be influenced by demand from Asia, global economic performanceand production levels of mines and smelters. Our 2009 copper production iseconomically protected from declines in LME spot prices through the use offorwards and collars. At spot prices between $1.57 and $2.01 per pound weexpect to realize an average minimum price of $3.03 per pound. On approximatelyhalf of our production we are exposed to a decline in market prices below $1.57per pound and have upside participation above $2.01 per pound through buyingcalls that allowed us to lock in gains from $3.03 to $2.01 per pound andselling puts to finance these calls.

 

 

32

----

 

**CurrencyExchange Rates**

 

The results of our miningoperations outside the United States, particularly our mine operating costs,are affected by currency exchange rates. The largest single exposure we have isto the Australian dollar. We also have exposure to the Canadian dollar througha combination of Canadian mine operating costs and corporate administrationcosts; and the Papua New Guinea kina, Peruvian sol, Chilean peso andArgen-tinean peso through mine operating costs.

 

Fluctuationsin the US dollar increase the volatility of our costs reported in US dollars,subject to protection we have put in place through our currency hedgingprogram. In 2008, the Canadian dollar traded in a wide range of $0.77 to $1.03and closed at $0.81 due to volatility in the global economy and weaker energyand commodity prices. The Australian dollar experienced high volatility aswell, trading in a range of $0.60 to $0.98 and closed at $0.70, due in part todecreasing interest rate differentials and the impact of the global economicslowdown and weaker commodity prices.

 

About60-65% of our consolidated production costs are denominated in US dollars andare not exposed to fluctuations in US dollar exchange rates. For the remainingportion, our currency hedge position allows for more accurate forecasting ofour anticipated expenditures in US dollar terms and mitigates our exposure tovolatility in the US dollar. Over the last three years, our currency hedgeposition has provided benefits to us in the form of hedge gains when contractexchange rates are compared to prevailing market exchange rates as follows: 2008– $106 million; 2007 – $166 million; and 2006 – $84 million. These gains arerecorded within our operating costs. We have also recorded hedge gains as anoffset to corporate administration costs as follows: 2008 – $11 million; 2007 –$19 million; and 2006 – $14 million.

 

For2009, our average Australian and Canadian dollar hedge rates exceed the currentmarket rates for these currencies. The average hedge rates vary depending onwhen the contracts were put in place. We are approximately 95% hedged in 2009 forexpected Australian and Canadian operating expenditures at rates of 0.76 and0.94, respectively. In addition, we have hedged 90% of our expected 2010Australian operating expenditures at a rate of $0.80. Assuming market exchangerates remain at the December 31st levels of $0.70 and $0.82, we expect torecord opportunity losses of approximately $135 million in 2009 (about $14 perounce on total 2009 production), or approximately $100 million for theAustralian dollar and approximately $35 million for the Canadian dollar, whichwill primarily impact our administration costs. Further information on ourcurrency hedge positions is included in note 20 to the Financial Statements.

 

 

 

33

----

 

**Fuel**

 

We consume on average about3.5 million barrels of diesel fuel annually across all our mines. Diesel fuelis refined from crude oil and is therefore subject to the same price volatilityaffecting crude oil prices. With global demand decreasing towards the end of2008 on fears of a global slowdown in economic activity, oil prices decreasedfrom a record high of $147 per barrel in third quarter 2008 to close at $45 perbarrel at the end of the year.

 

Volatility in crude priceshas a significant direct and indirect impact on our production costs. In orderto mitigate this volatility, we employ a strategy combining the use of futurescontracts and our production from Barrick Energy to effectively hedge ourexposure to high oil prices. We currently have futures contracts in placetotaling 5.1 million barrels, which represents about 62% of our total estimateddirect consumption in 2009 and 21% of our total estimated direct consumptionover the following four years. Those contracts are primarily designated for ourNevada-based mines, and have an average price of $91 per barrel. In 2008, werealized benefits in the form of fuel hedge gains on those contracts totaling$33 million (2007: $29 million; 2006: $16 million), when contract prices werecompared to market prices. At a price of $42 per barrel, we expect to realizeopportunity losses of approximately $100 million in 2009 from our financialcontracts. In 2009, we expect Barrick Energy to produce about 1.4 millionbarrels of oil equivalent at a cash cost of about $29 per barrel. Thecombination of our financial contracts and expected Barrick Energy productionprovide us with an economic hedge of 3.5 million barrels for 2009 at an averagecost of $69 per barrel.

 

 

**CostPressures**

 

Beyond fuel, the miningindustry has also experienced high volatility in the prices of many of itsother commodities and consumables used in the production of gold and copper.

 

Inthe case of sulfuric acid, we experienced a period of high market prices andsupply shortages which have had a significant impact on production costs anddisrupted production levels, particularly at our Zaldívar copper mine. We havenow secured the supply and price of substantially all of our sulfuric acidneeds for 2009 and over half of the supply expected to be required for 2010 and2011 through firmly committed contracts, which should reduce the risk of futuresupply shortages and exposure to fluctuating prices.

 

Electricityprices fell from the highs experienced in third quarter 2008 primarily due tothe decrease in the prices of diesel, coal, propane and natural gas, which areused for power generation. We continue to pursue alternative strategies toreduce our energy cost exposure, such as the operation of our natural gas-firedelectricity plant to power our Nevada-based mines and its adjacent solar farm,our wind farm in Chile and our high-altitude wind turbine in Argentina.

 

Thetrend to lower prices for commodities and other consumables seen in the latterhalf of 2008 is expected to provide some eventual relief from the extraordinaryrate of cost escalation the industry has witnessed over the last few years ifprices remain at these lower levels. However, these lower prices will notsignificantly benefit our operating costs in 2009 due to the impact of existinginventory supplies, committed purchase contracts and commodity hedge contracts.

 

34

----

 

Inaddition to the volatile environment for operating expenses, we are alsosubject to fluctuations in certain commodity prices with respect to our capitalprojects. In particular, the cost of structured steel is a significantproportion of our pre-production capital costs at our development projects.Steel prices have been volatile since February 2008, when steel billetcontracts first began trading on the LME. From the introduction of the January 2008Mediterranean Steel Futures contract on the LME to the end of 2008, pricestraded in a $1,110 per tonne range ($255 to $1,265 per tonne), closing the yearat $368 per tonne. The fluctuations in the price of steel are a result of broadvolatility in commodity prices.

 

**US DollarInterest Rates**

 

As a result of thecontraction of global credit markets and in an effort to spur economic activityand avoid potential deflation, the US Federal Reserve reduced short-term USdollar interest rates in 2008. Commercial credit spreads have widened, largelyin response to the global re-pricing of credit. Rising credit spreads wouldincrease our costs of new financing if this environment persists. In 2009, we expectthat short-term rates will remain approximately at present levels followed byincremental increases to the short-term rate once economic conditions andcredit markets normalize.

 

Ourinterest rate exposure mainly relates to the mark-to-market value of derivativeinstruments, the fair value and ongoing payments under U.S. dollarinterest-rate swaps and to the interest payments on Barrick’s variable-ratedebt ($0.3 billion at the end of the year), interest receipts on Barrick’s cashbalances ($1.4 billion at the end of the year) and the valuation and forwardprices of our Project Gold Sales Contracts. At present, the amount of interestexpense recorded in our consolidated statement of income is not materiallyimpacted by changes in short-term interest rates, due to the fact that themajority of our interest costs incurred are capitalized within property, plantand equipment. The relative amounts of variable-rate financial assets andliabilities may change in the future, depending upon the amount of operatingcash flow we generate, as well as amounts invested in capital expenditures.

 

 

35

----

 

**Financial Overview**

** **

**Summary of Key Financial Results**

 
| **($ millions, except per share data in dollars)**   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|-----------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| **For the years ended December 31**                            | ** ** | **2008**   | ** ** | **2007**   | ** ** | **2006**   | ** ** |
| Revenues                                                                                | ** ** | **$**      | **7,913**  |       | $          | 6,332      |       | $ | 5,630 |   |
| Net income                                                                              | ** ** | **785**    |       | 1,119      |       | 1,506      |       |
| Per share(1)                                                                            | ** ** | **0.90**   |       | 1.29       |       | 1.79       |       |
| Net income                                                                              | ** ** | **785**    |       | 1,119      |       | 1,506      |       |
| Impairment charges related to goodwill,  property, plant and equipment, and investments | ** ** | **899**    |       | 59         |       | 17         |       |
| (Gains)/losses on the disposition of  long-lived assets                                 | ** ** | **(178**   | **)**      | (59        | )          | (301       | )          |
| Foreign currency translation (gains)/losses                                             | ** ** | **135**    |       | (73        | )          | (7         | )          |
| Unrealized (gains)/losses on non-hedge  derivative instruments                          | ** ** | **20**     |       | (10        | )          | 15         |       |
| Adjusted net income(2)                                                                  | ** ** | **1,661**  |       | 1,036      |       | 1,230      |       |
| Per share(1)                                                                            | ** ** | **1.90**   |       | 1.19       |       | 1.46       |       |
| EBITDA(3)                                                                               | ** ** | **2,347**  |       | 2,436      |       | 2,605      |       |
| Operating cash flow                                                                     | ** ** | **2,206**  |       | 1,732      |       | 2,122      |       |
| Sustaining capital expenditures(4)                                                      | ** ** | **742**    |       | 679        |       | 720        |       |
| Project capital expenditures(4)                                                         | ** ** | **739**    |       | 243        |       | 258        |       |
| Total assets                                                                            | ** ** | **24,161** |       | 21,951     |       | 21,510     |       |
| Total liabilities                                                                       | ** ** | **8,702**  |       | 6,613      |       | 7,255      |       |
| Dividends declared                                                                      | ** ** | **$**      | **349**    |       | $          | 261        |       | $ | 191 |   |

----

| (1) | Calculated using weighted  average number of shares outstanding under the basic method.                                                                                                                                |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Adjusted net income is a  non-GAAP financial performance measure with no standardized meaning under US  GAAP. For further information and a detailed reconciliation, please see  page 72 of this MD&A.        |
| (3) | EBITDA is a non-GAAP  financial performance measure with no standardized meaning under US GAAP. For  further information and a detailed reconciliation, please see page 75 of  this MD&A.                     |
| (4) | Amount presented is on a  cash basis and reflects our equity share of capital expenditures on our  advanced projects. For a detailed reconciliation and further discussion,  please see page 57 of this MD&A. |

 

In 2008, net incomedecreased by $334 million, or 30% to a total of $785 million. EBITDA of $2,347million was slightly lower than the $2,436 million recorded in the prior year.These decreases primarily relate to impairment charges related to goodwill andlong-lived assets of $749 million and investments of $205 million. The goodwilland long-lived asset impairments were mainly due to: higher discount factorsand lower valuation multiples reflecting present equity market conditions;lower copper price assumptions, which resulted in a significant reduction inproduction levels and remaining economic life at our Osborne copper mine; asignificant decline in the oil price since the acquisition date of BarrickEnergy; and the expected closure of the Henty mine on exhausting reserves in2009. Investment impairment charges are primarily attributable to thewrite-down of our investment in Highland Gold due to the significant decreasein equity values of companies with significant exposure to the Russian market.

 

**ImpairmentCharges Related to Goodwill, Property, Plant and Equipment, and Investments**

 
| **($ millions)**                                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|--------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| **For the years ended December 31** | ** ** | **2008**   | ** ** | **2007**   | ** ** | **2006**   | ** ** |
| Kanowna                                                      | ** ** | **$**      | **272**    |       | $          | —     |       | $ | — |   |
| North Mara                                                   | ** ** | **218**    |       | —     |       | —     |       |
| Investment in Highland Gold                                  | ** ** | **120**    |       | —     |       | —     |       |
| Osborne                                                      | ** ** | **104**    |       | —     |       | —     |       |
| Barrick Energy                                               | ** ** | **88**     |       | —     |       | —     |       |
| Henty                                                        | ** ** | **30**     |       | —     |       | —     |       |
| Asset-Backed Commercial Paper                                | ** ** | **28**     |       | 14         |       | —     |       |
| Golden Sunlight                                              |       | —     |       | 35         |       | —     |       |
| Eskay Creek                                                  |       | —     |       | 7          |       | —     |       |
| Other                                                        | ** ** | **39**     |       | 3          |       | 17         |       |
| Total (net of tax)                                           | ** ** | **$**      | **899**    |       | $          | 59         |       | $ | 17 |   |

 

36

----

 

Various other factorsaffected both net income and adjusted net income. The following chartillustrates those factors in the context of adjusted net income.

 

 

In 2008, we amended ourdefinition of adjusted net income to exclude from this measure the impact of:impairment charges related to goodwill, property, plant and equipment, andinvestments; gains/losses on the disposition of long-lived assets; foreigncurrency translation gains/losses; and unrealized gains/losses on non-hedgederivative contracts. Previously, our adjusted net income was defined as netincome excluding the impact of deliveries into our Corporate Gold SalesContracts. Management believes that highlighting the impact of theseadjustments provides investors and analysts with a better understanding of ourunderlying operating results. In addition, management uses this measure toprepare its internal budgets, forecasts and public guidance. Consequently, forthese reasons, management believes that the inclusion of this financial measureprovides useful information that, when used in conjunction with net incomecomputed in accordance with US GAAP, provides investors and analysts with abetter understanding of our performance for the period and our futureprospects. Adjusted net income is a non-GAAP financial measure. For a fulldefinition and reconciliation, refer to page 72 of this MD&A.

 

Operatingcash flow increased $474 million from the prior year to a total of $2,206million. The increase in operating cash flow reflects higher realized goldprices partly offset by higher total cash costs, lower gold sales volumes andhigher inventory and working capital balances. Sustaining capital expenditureswere $742 million, slightly higher than the prior year. Our share of projectcapital expenditures was $739 million, compared to $243 million in 2007,reflecting an increase in activity at the Cortez Hills, Pueblo Viejo andBuzwagi projects.

 

**Summary of Key Operational Statistics**

 
| **($ millions, except per ounce/pound data in dollars)** | ** ** | **Gold**  | ** ** | **Copper** | ** ** |
|---------------------------------------------------------------------------------------------|------------|-----------|------------|------------|------------|
| **For the years ended December 31**                                | ** ** | **2008**  | ** ** | **2007**   | ** ** | **2006** | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
| Production (000s ounces/millions pounds)(1)                                                 | ** ** | **7,657** |       | 8,060      |       | 8,643 | ** ** | **370** |   | 402 |   | 367 |   |
| Reserves (millions of contained  ounces/billions of contained pounds)(2)                    | ** ** | **138.5** |       | 124.6      |       | 123.1 | ** ** | **10.0** |   | 6.2 |   | 6.0 |   |
| Sales                                                                                       |       |      |       |       |       |   |   |   |   |   |   |   |   |
| 000s ounces/millions pounds                                                                 | ** ** | **7,595** |       | 8,055      |       | 8,390 | ** ** | **367** |   | 401 |   | 376 |   |
| $ millions                                                                             | ** ** | **$**     | **6,656**  |       | $          | 5,027 |   | $ | 4,493 | ** ** | **$** | **1,228** |   | $ | 1,305 |   | $ | 1,137 |   |
| Market price                                                                                | ** ** | **872**   |       | 695        |       | 604 | ** ** | **3.15** |   | 3.23 |   | 3.05 |   |
| Realized price(3)                                                                           | ** ** | **870**   |       | 619        |       | 543 | ** ** | **3.39** |   | 3.22 |   | 3.06 |   |
| Cost of sales ($ millions)                                                             | ** ** | **3,426** |       | 2,805      |       | 2,319 | ** ** | **436** |   | 339 |   | 391 |   |
| Total cash costs(4)                                                                         | ** ** | **$**     | **443**    |       | $          | 345 |   | $ | 280 | ** ** | **$** | **1.19** |   | $ | 0.82 |   | $ | 0.78 |   |

 

----

| (1) | Gold production and total  cash cost per ounce/per pound statistics reflect our equity share of  production.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Calculated in accordance  with National Instrument 43-101 as required by Canadian securities regulatory  authorities. For United States reporting purposes, Industry Guide 7, (under  the Securities and Exchange Act of 1934), as interpreted by Staff of the SEC,  applies different standards in order to classify mineralization as a reserve.  Accordingly, for U.S. reporting purposes, Cerro Casale is classified as  mineralized material and approximately 600 thousand ounces of reserves for  Pueblo Viejo (Barrick’s 60% interest) are classified as mineralized material.  For a breakdown of reserves and resources by category and additional  information relating to reserves and resources, see pages 141 to 148. |
| (3) | Realized price is a  non-GAAP financial performance measure with no standardized meaning under US  GAAP. For further information and a detailed reconciliation, please see page 75  of this MD&A.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (4) | Total cash costs per  ounce/pound is a non-GAAP financial performance measure with no standardized  meaning under US GAAP. For further information and a detailed reconciliation,  please see page 73 of this MD&A.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

 

37

----

 

Total revenues of $7.9billion were up $1.6 billion or 25% compared to the prior year, primarily dueto higher realized gold and copper prices, which was partially offset by adecrease in sales volumes. Realized gold prices of $870 per ounce in 2008 were41% higher than in 2007, principally due to higher market gold prices. Realizedgold prices in 2007 reflect a reduction of $636 million (2006: $367 million),or $76 per ounce (2006: $44 per ounce), due to the voluntary delivery of 2.5million ounces (2006: 1.2 million ounces) into our Corporate Gold SalesContracts at average prices below the prevailing spot price.

 

Realizedcopper prices in 2008 were 5% higher than in 2007, with variability quarter toquarter reflecting the variability of market prices throughout the year, andthe impact of our copper hedge positions in fourth quarter 2008. Current spotprices are significantly lower than 2008 realized prices. However, due to ourhedge positions, we are largely economically protected from the decline in spotprices in 2009. In 2010, we are fully exposed to copper market prices.

 

In2008, cost of sales attributable to gold increased by $621 million, or 22%compared to the prior year. On a total cash costs(1) per ounce basis,costs were up $98 per ounce, or 28% compared to the prior year. Cost of salesand total cash costs were impacted by increased amounts of waste mining atcertain of our operations; inflationary pressures for input costs such aslabor, oil, electricity and commodities and other consumables; increases inroyalties and production taxes, and lower by-product credits and other goldprice linked costs. In addition, total cash costs were impacted by loweraverage head grades.

 

Costof sales attributable to copper increased by $97 million, or 29% compared tothe prior year. Total cash costs per pound increased by $0.37, or 45% comparedto the prior year. The increase in cost of sales attributable to copper andtotal cash costs per pound was primarily attributable to a significant increasein sulfuric acid prices and higher electricity prices resulting from a newhigher-cost power contract at Zaldívar. The increases also reflect inflationarypressures on labor and other consumables and currency exchange impacts.

 

In2008, we amended our definition of total cash costs to exclude the impact ofunrealized non-hedge gains/losses on derivative contracts and to include theeconomic impact of our Barrick Energy unit. These changes are consistent withhow management prepares its budget, forecasts and public guidance for totalcash costs. In addition, many other gold companies present their total cashcosts metric in this manner. Consequently, management believes that the changesto the calculation of total cash costs in 2008 provides investors and analystswith more accurate information on our underlying cash costs of production inthe periods presented and is more comparable to the measure of total cash costspresented by other gold mining companies.

 

Weproduce an insignificant amount of non-gold metals in conjunction with theproduction of gold at certain of our operating mines, and in particular, copperis contained within the ore concentrate produced at our Bulyanhulu mine. Thenet economic effect of these non-gold metals is recorded within cost of salesas a by-product credit. In 2008, we recorded by-product credits of $6 million(2007: $15 million).

 

Somegold producers report a measure of total cash costs per ounce that reflects thenet contribution from all non-gold revenue streams as a by-product credit ofproducing gold. We have provided a measure of total cash costs per ounce onthis basis, whether or not these non-gold metals are produced in conjunctionwith gold, in order to enable investors to better understand our performance incomparison to those other gold producers. Total cash costs on a full credit fornon-gold sales basis(2) were $337 per ounce compared to $228 in the prioryear.

 

Cashmargins per ounce illustrate the trends in profitability and the impact offluctuations in realized prices and total cash costs on our ability to generateearnings and operating cash flow.(3) Cash margins per ounce increased in2008 as the rise in gold prices outpaced rising total cash costs.

 

----

| (1) | Total cash costs is a  financial performance measure with no standardized meaning under US GAAP. For  a full definition of total cash costs and a reconciliation to cost of sales,  refer to page 73 of this MD&A.                                                                                                                                                                                                                      |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Total gold cash costs per  ounce — full credit for non-gold sales is a financial performance measure  with no standardized meaning under US GAAP. For further information and a  detailed reconciliation of this measure, please see page 73 of this  MD&A.                                                                                                                                                                        |
| (3) | Cash margins per ounce, is  a non-GAAP measure used by management to assess the ability of our gold  operations to generate operating cash flow and analyze profitability trends.  It has no standardized meaning under US GAAP.For a full definition and calculation,  please refer to page 76 of this MD&A. Assuming an average spot gold  price in 2009 of $850, we expect to realize cash margins of about $375 to  $400 per ounce. |

 

38

----

 

 

----

| (1) | 2007 cash margins reflect a  $76 per ounce (2006: $44 per ounce) impact from our voluntary deliveries into  our Corporate Gold Sales Contracts. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Assuming an average market  gold price of $850 per ounce in 2009.                                                                               |

 

**OperationalOverview**

 
| **For the years ended** | ** ** | ** ** | ** **  | ** ** | ** ** | ** **        | ** ** | ** ** | ** ** |
|----------------------------------------|------------|------------|-------------|------------|------------|-------------------|------------|------------|------------|
| **December 31**                   | ** ** | **2008**   | ** **  | **2007**   | ** ** | **% Change** | ** ** | **2006**   | ** ** |
| **Gold**                               |       |       | ** **  |       |       |              |       |       |       |
| Tons mined (millions)                  | ** ** | **680**    | ** **  | 653        |       | 4                 | %          | 600        |       |
| Ore tons processed (millions)          |       | **191**    | ** **  | 172        |       | 11                | %          | 157        |       |
| Average grade (ozs/ton)                | ** ** | **0.047**  | ** **  | 0.055      |       | (15               | )%         | 0.067      |       |
| Recovery rate                          | ** ** | **84.4**   | **% ** | 84.7       | %     | (1                | )%    | 82.3       | %          |
| Gold produced (000s/oz)                | ** ** | **7,657**  | ** **  | 8,060      |       | (5                | )%         | 8,643      |       |
| **Copper**                             |       |       | ** **  |       |       |              |       |       |       |
| Tons mined (millions)                  | ** ** | **83,221** | ** **  | 89,607     |       | (7                | )%         | 92,342     |       |
| Ore tons processed (millions)          |       | **43,813** | ** **  | 39,016     |       | 12                | %          | 28,166     |       |
| Average grade (percent)                | ** ** | **0.6**    | ** **  | 0.7        |       | (14               | )%         | 0.10       |       |
| Copper produced (millions/lbs)         |       | **370**    | ** **  | 402        |       | (8                | )%         | 367        |       |

 

**Production**

 

Gold production in 2008 was403 thousand ounces or 5% lower than in 2007, reflecting lower production inAfrica, Australia and North America, partially offset by higher production inSouth America. Copper production was 8% lower than the prior year period due tolower production from both Zaldívar and Osborne in 2008.

 

**Tons Minedand Tons Processed – Gold**

 

Total tons mined and tonsprocessed increased by 4% and 11%, respectively, compared to 2007. The highertons mined was mainly due to the increased waste stripping activity at Cowalfollowing the East Wall slip and the acquisition of the additional 40% interestin Cortez. Higher tons processed resulted from increased material placed on theleach pad at Veladero and the impact of the acquisition of an additional 40% ofCortez in early 2008.

 

 

----

| (1) | All amounts presented are  based on equity production. |
|-----|--------------------------------------------------------|

 

39

----

 

**AverageMill Head Grades – Gold**

 

Average mill head gradesdecreased by approximately 15% in 2008 compared to the prior year, primarilydue to mine sequencing that resulted in lower ore grades at certain mines. Wewere mining below our average reserve grade in 2008. In 2008, we continued totake advantage of the high gold price environment in order to process materialthat would otherwise be uneconomical in a lower gold price environment, therebyearning an operational contribution from low-grade material that wouldotherwise be classified as waste.

 

 

----

| (1) | All amounts presented based  on equity production. Average mill head grades are expressed as the number of  ounces of gold contained in a ton of ore processed. Reserve grade represents  expected grade over the life of the mine and is calculated based on reserves  reported at the end of the immediately preceding year. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

**Safety**

 

In 2008, we achieved areduction in the number of total injuries and lost time injuries, continuing atrend of year over year performance improvements. Lost time injuries arerecorded when an employee or contractor takes time off the following day orshift following an incident. An incident-free work place is our vision. Inaddition, we are pleased to announce that seven producing sites achieved zerolost time injury rates in 2008, including Pascua-Lama which has achieved atotal of 5 million hours worked with no lost time injury.

 

 

**Reserves(4)**

 

At year-end 2008, theCompany added 23.0 million ounces, and after depletion of 9.1 million ounces,proven and probable gold reserves increased by 13.9 million ounces to 138.5million ounces, the largest in the industry, based on an assumed $725 per ouncegold price. The increase reflects the inclusion of 10.8 million ouncesattributable to our 51% ownership interest in Cerro Casale in proven andprobable reserves; 1.2 million additional ounces at Pueblo Viejo, and 6.4million ounces at Cortez reflecting 2.4 million ounces at the Cortez-Crossroadsdeposit and our additional 40% in ownership.

 

Measuredand indicated gold mineral resources grew by 29% to 65.0 million ounces andinferred gold mineral resources grew 9% to 34.8 million ounces based on an $850per ounce gold price. We recorded 2.3 million ounces in gold mineral resourcesfor Cerro Casale. Reko Diq resources increased by 4.7 million ounces to 8.5million ounces and Donlin Creek resources increased 3.1 million ounces to 17.7million ounces at year end 2008. Measured and indicated resources in the CortezHills underground increased from 1.1 million ounces to 2.0 million ounces.

 

----

| (4) | For a breakdown of reserves  and resources by category and additional information relating to reserves and  resources, see pages 141 to 148 of this Financial Report 2008. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

40

----

 

Copperreserves increased to 6.4 billion pounds and measured and indicated resourcesincreased by 7.1 billion pounds to 12.5 billion pounds. Contained silver withinreported gold reserves is over one billion ounces.

 

Replacinggold and copper reserves depleted by production year over year is necessary inorder to maintain production levels over the long term. If depletion ofreserves exceeds discoveries over the long term, then we may not be able tosustain gold and copper production levels. Reserves can be replaced byexpanding known ore bodies, acquiring mines or properties or discovering newdeposits. Once a site with gold or copper mineralization is discovered, ittakes several years from the initial phases of drilling until production ispossible, during which time the economic feasibility of production may change.Substantial expenditures are required to establish proven and probable reservesand to permit and construct mining and processing facilities.

 

**KeyBusiness Transactions**

 

**Acquisitionof 40% interest in Cortez**

 

On March 5, 2008, wecompleted our acquisition of the additional 40% interest in the Cortez propertyfor a total cash consideration of $1.7 billion. The acquisition consolidates100% ownership for Barrick of the existing Cortez mine and the Cortez Hillsexpansion.

 

**Acquisitionof Barrick Energy**

 

In 2008, we acquired all theissued and outstanding shares of Cadence Energy Inc. for cash consideration of$377 million, as well as oil and gas assets at Sturgeon Lake, Alberta, fromDaylight Resources Trust, for cash consideration of $83 million. Daylight’sSturgeon Lake assets are adjacent to Cadence Energy’s Sturgeon Lake assets andthe consolidated ownership will allow us to exploit and develop these assets.These acquisitions together comprise Barrick Energy, which was formed as partof our long-term strategy to economically hedge our exposure to oil prices.

 

**OperatingSegments Review**

 

We report our results ofoperations using a geographical business unit approach: North America, SouthAmerica, Australia Pacific and Africa. In addition, we have a Capital Projectssegment, distinct from our regional business units, to focus on managingprojects. This structure reflects how we manage our business and how weclassify our operations for planning and measuring performance.

 

Inour Financial Statements, we present a measure of historical segment incomethat reflects gold sales and copper sales at average consolidated realized goldand copper prices, respectively, less segment expenses and amortization ofsegment property, plant and equipment.

 

Wemonitor segment expenses and period to period fluctuations in our total cost ofsales on a unit basis, per ounce of gold and per pound of copper, which isreferred to as total cash costs. Therefore, the discussion of results for ourproducing mines focuses primarily on this statistic to explain changes insegment expenses.

 

**North America**

** **

**KeyOperating Statistics**

 
| **For the years ended** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **        | ** ** | ** ** | ** ** |
|----------------------------------------|------------|------------|------------|------------|------------|-------------------|------------|------------|------------|
| **December 31**                   | ** ** | **2008**   | ** ** | **2007**   | ** ** | **% Change** | ** ** | **2006**   | ** ** |
| Tons mined (millions)                  | ** ** | **360**    |       | 335        |       | 7                 | %          | 274        |       |
| Ore tons processed (millions)          | ** ** | **92**     |       | 76         |       | 21                | %          | 69         |       |
| Average grade (ozs/ton)                | ** ** | **0.041**  |       | 0.051      |       | (20               | )%         | 0.045      |       |
| Gold produced (000s/oz)                | ** ** | **3,028**  |       | 3,201      |       | (5                | )%         | 3,372      |       |
| Cost of sales ($ millions)        | ** ** | **$**      | **1,517**  |       | $          | 1,178             |       | 29         | %          | $ | 1,039 |   |
| Total cash costs (per oz)              | ** ** | **$**      | **493**    |       | $          | 363               |       | 36         | %          | $ | 310 |   |

 

Production for 2008 was 5%lower than the same prior year period due to lower production at GoldenSunlight, Eskay Creek, Turquoise Ridge, Round Mountain and Hemlo; partly offsetby higher production at Cortez and Goldstrike.

 

AtGoldstrike, production increased by 77 thousand ounces as a result of a 10%increase in average grade due to processing of higher grade ore as a result ofthe completion of a significant waste stripping phase in second quarter 2008.At Cortez, production increased by 105 thousand ounces compared to the prioryear, primarily reflecting the acquisition of the remaining 40% interest infirst quarter 2008. At Golden

 

41

----

 

Sunlight, productiondecreased by 78 thousand ounces as the mine entered into an extended period ofwaste stripping due to a mine expansion plan, which extends the mine life to2015 and adds approximately 400 thousand ounces to proven and probablereserves. At Eskay Creek, planned production ended in late first quarter 2008,and reclamation and closure activities have commenced. At Turquoise Ridge,lower production resulted from the decision to place the Getchell mine on careand maintenance. At Round Mountain and Hemlo, production decreased due to anexpected decline in ore tons processed and grade.

 

Costof sales applicable to gold increased by $339 million, or 29%, and total cashcosts per ounce increased by $130, or 36% compared to the same prior year period.The increase in cost of sales and total cash costs during the current yearreflect higher input costs for diesel, propane and labor; higher royalties andproduction taxes; lower average grade at certain of our mines; and lower silverby-product credits due to the end of operations at Eskay Creek. In addition,total cash costs were impacted by lower production levels.

 

In2009, we expect gold production in the range of 2.55 to 2.7 million ounces.Cost of sales applicable to gold is expected to be $1.3 to $1.5 billion, or ona total cash costs basis $520 to $550 per ounce. Production is expected to belower than 2008 primarily due to lower processed grade and recovery rates ofalkaline ore at Goldstrike; Golden Sunlight, where the mine will be entering intoan extensive waste stripping phase and due to lower grades at Round Mountain;partially offset by higher production expected at Cortez. In 2008, we conductedtests using a modified pressure technology that would allow the autoclaves atGoldstrike to process alkaline ore that would have been previously treated atthe roaster facility, thus extending the life of the autoclave and acceleratingthe production time-table for this type of ore. However, recovery percentageswere lower than expected. Accordingly, expected production from alkaline ore in2009 is approximately 400 thousand ounces lower than 2008. Cost of sales andtotal cash costs per ounce are expected to be slightly higher in 2009, mainlydue to the impact of lower production levels.

 

*SignificantProjects – Cortez Hills*

 

Cortez Hills enteredconstruction in late November following receipt of the Record of Decisionand is expected to enter production in the first quarter of 2010, assumingsatisfactory resolution of pending litigation regarding the project. In fourthquarter 2008, a number of opponents of the Cortez Hills expansion filed suit inthe United States District Court for the District of Nevada seeking to overturnthe Bureau of Land Management’s approval of the Cortez Hills project on environmentaland religious grounds. The plaintiffs unsuccessfully sought to enjoinconstruction of the project pending consideration of their claims. The DistrictCourt’s denial of the requested injunction is currently being appealed.

 

Pre-strippingwork is currently underway on the open pit along with work on the conveyor,crusher, workshops and access roads. Once completed, the Cortez Hills projectis expected to become a key, long life, low cost mine. Total construction costsremain in line with the pre-production capital budget of approximately $500million. In addition to the original scope of work, we have accelerated ourunderground development schedule. To date, we have spent $40 million, and weexpect to spend an additional $50 to $80 million advancing undergrounddevelopment in the following twelve months. The expanded Cortez operation isexpected to have average production of about 1.0 million ounces at total cashcosts of about $350 to $400(5) per ounce in its first full five years ofproduction. Total cash costs in the current plan reflect the inclusion ofincremental lower grade heap leach ore from the Pipeline area due to a highergold price assumption, and the associated costs for labor, consumables andstripping. Higher proven and probable reserves of 13.3 million ounces atyear-end 2008 for Cortez reflect the 40% interest acquired earlier in the yearplus an additional 2.4 million ounces in the Crossroads area. Measured andindicated resources in the Cortez Hills underground increased from 1.1 millionounces to 2.0 million ounces. The Cortez property continues to demonstratesignificant exploration potential. As a follow up to the successful 2008 workprogram, the Company plans to spend $18 million on exploration at Cortez with atotal of seven rigs being committed to this extensive, underexplored propertyin 2009.

 

----

(5) Based on an oil price of$75 per barrel and life of mine HFO power.

 

42

----

 

**South America**

** **

**Key Operating Statistics**

 
| **For the years ended** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **        | ** ** | ** ** | ** ** |
|----------------------------------------|------------|------------|------------|------------|------------|-------------------|------------|------------|------------|
| **December 31**                   | ** ** | **2008**   | ** ** | **2007**   | ** ** | **% Change** | ** ** | **2006**   | ** ** |
| **Gold**                               |       |       |       |       |       |              |       |       |       |
| Tons mined (millions)                  | ** ** | **151**    |       | 151        |       | 0                 | %          | 168        |       |
| Ore tons processed (millions)          | ** ** | **65**     |       | 59         |       | 10                | %          | 53         |       |
| Average grade (ozs/ton)                | ** ** | **0.037**  |       | 0.042      |       | (12               | )%         | 0.054      |       |
| Gold produced (000s/oz)                | ** ** | **2,111**  |       | 2,079      |       | 2                 | %          | 2,104      |       |
| Cost of sales ($ millions)        | ** ** | **$**      | **531**    |       | $          | 400               |       | 33         | %          | $ | 305 |   |
| Total cash costs (per oz)              | ** ** | **$**      | **251**    |       | $          | 193               |       | 30         | %          | $ | 147 |   |
| **Copper**                             |       |       |       |       |       |              |       |       |       |
| Copper produced (millions of lbs)      |       | **295**    |       | 315        |       | (6                | )%         | 308        |       |
| Cost of sales ($ millions)        | ** ** | **$**      | **315**    |       | $          | 231               |       | 36         | %          | $ | 282 |   |
| Total cash costs (per lb)              | ** ** | **$**      | **1.08**   |       | $          | 0.69              |       | 57         | %          | $ | 0.62 |   |

 

Gold production levels in2008 were up slightly from the prior year period as an increase in tonsprocessed was partially offset by lower average grades. At Veladero, productionwas up 62 thousand ounces, or 13% compared to the same prior year period,primarily as a result of a 19% increase in ore placed on the leach pad. LagunasNorte continued to deliver strong results, with production totaling 1,175thousand ounces, 18% higher than the prior year. These increases were partiallyoffset by a decrease in production of 120 thousand ounces at Pierina as aresult of the planned mining of lower grade ore as the mine nears the end ofits economic life.

 

Costof sales applicable to gold was $531 million, an increase of $131 million or33% compared to the same prior year period. Total cash costs per ounceincreased by $58 per ounce to $251 per ounce in 2008. The increase in cost ofsales and total cash costs is largely due to increased production at our highercost Veladero mine, which contributed $45 per ounce of the overall increase intotal cash costs; higher input costs for consumables and labor used in theproduction process; higher maintenance expenditures; and higher costs forconsumables used within the production process compared to the prior year.

 

In2009, we expect gold production in the range of 1.95 to 2.06 million ounces.Cost of sales applicable to gold is expected to be about $550 to $640 million, or$285 to $310 per ounce on a total cash costs basis. Production is expected tobe slightly lower than 2008, as higher production at Veladero is expected to beoffset by lower production at Pierina. As a result of this production mix, weexpect cost of sales and total cash costs per ounce to be higher in 2009.

 

In2008, Zaldívar produced 295 million pounds of copper at an applicable cost ofsales of $315 million or $1.08 per pound on a total cash costs basis. Lowerproduction compared to the prior year reflects lower tonnage placed on theleach pad and the realization of lower overall recovery rates as a result ofpoor leaching kinetics due to shortages in the supply of sulfuric acidexperienced in 2008. We expect production to increase to a range of 305 to 320million pounds in 2009 due to higher expected recovery rates reflecting theresolution of sulfuric acid supply constraints. Cost of sales applicable tocopper and total cash costs per pound in 2008 were impacted by the increasedcost of fuel and acid, along with inflationary pressures on labor andconsumables, and higher electricity prices resulting from the transition to anew higher-cost power contract in mid-2008. We expect 2009 cost of salesapplicable to copper to be in the range of $350 million to $400 million, andtotal cash costs to be in the range of $1.15 to 1.25 per pound.

 

**Australia Pacific**

** **

**KeyOperating Statistics**

 
| **For the years ended** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **        | ** ** | ** ** | ** ** |
|----------------------------------------|------------|------------|------------|------------|------------|-------------------|------------|------------|------------|
| **December 31**                   | ** ** | **2008**   | ** ** | **2007**   | ** ** | **% Change** | ** ** | **2006**   | ** ** |
| **Gold**                               |       |       |       |       |       |              |       |       |       |
| Tons mined (millions)                  | ** ** | **147**    |       | 144        |       | 2                 | %          | 137        |       |
| Ore tons processed (millions)          | ** ** | **29**     |       | 33         |       | (12               | )%         | 30         |       |
| Average grade (ozs/ton)                | ** ** | **0.077**  |       | 0.078      |       | (1                | )%         | 0.087      |       |
| Gold produced (000s/oz)                | ** ** | **1,942**  |       | 2,123      |       | (9                | )%         | 2,220      |       |
| Cost of sales ($ millions)        | ** ** | **$**      | **1,051**  |       | $          | 934               |       | 13         | %          | $ | 749 |   |
| Total cash costs (per oz)              | ** ** | **$**      | **550**    |       | $          | 447               |       | 23         | %          | $ | 350 |   |
| **Copper**                             |       |       |       |       |       |              |       |       |       |
| Copper produced (millions of lbs)      |       | **75**     |       | 87         |       | (14               | )%         | 59         |       |
| Cost of sales ($ millions)        | ** ** | **$**      | **121**    |       | $          | 108               |       | 12         | %          | $ | 109 |   |
| Total cash costs (per lb)              | ** ** | **$**      | **1.64**   |       | $          | 1.36              |       | 21         | %          | $ | 1.52 |   |

 

43

----

 

Total gold production in2008 was 9% lower than the same prior year period as a result of lower goldproduction at Kanowna, Yilgarn South(6),Plutonic and Cowal, partially offset by increased production at Porgera.

 

AtKanowna, production decreased primarily due to decreased processing of open pitmaterial due to the disposition of the Paddington mill in August 2007. Inthe latter half of 2008, Kanowna transitioned to an underground miningoperation. The decrease in production at Plutonic was primarily due to stopesequencing and mine planning issues resulting from blocked paste holes and abacklog of paste requirements. Production was also impacted by an explosion atthe Varanus gas processing facility in June 2008, which resulted in thetemporary closure of the mill. Yilgarn South production levels were primarilyimpacted by lower ore feed at Granny Smith as the processing of open pitmaterial ended in early 2008. This decrease was partially offset by the ramp-upof underground operations in the second half of the year. At Cowal, the EastWall slip in December 2007 restricted access to high grade ore in thefirst half of the year which resulted in the mining of lower grade ore. Accessto higher grade ore and increased throughput rates partially improved overallrecovery rates in the latter part of the year. At Porgera, production levelsbenefited from the 20% increase in ownership to 95% and the mining of highergrade ore from both the open pit and underground mine.

 

Costof sales applicable to gold was higher by $117 million, or 13% compared to theprior year. Total cash cost per ounce increased by 23% or $103 per ouncecompared to the same prior year period. The increase in cost of sales and totalcash costs is due to the impact of higher diesel, commodity and consumablesprices, primarily at Plutonic where gas was temporarily sourced from highercost suppliers; increased labor rates; slightly higher currency hedge rates;and higher maintenance costs at Cowal coupled with the ongoing remediation workrelated to the East Wall. We are approximately 95% hedged in 2009 for expectedAustralia operating expenditures at a rate of $0.76. In addition, we have a 90%hedge on expected 2010 Australian operating expenditures at a rate of $0.80.

 

In2009, we expect gold production in the range of 1.85 to 2.0 million ounces as aresult of higher expected production at Cowal as completion of the remediationactivities of the East Wall provides access to higher grade ore; and atKalgoorlie and Plutonic where production is expected to increase based onimproved ore grades, equipment availability and the resolution of natural gassupply issues from the gas explosion in 2008; partially offset by lowerexpected production at Porgera attributable to lower tons processed due to ascheduled maintenance shut down of the ball mill for a major overhaul. Cost ofsales is expected to be about $1.1 to $1.2 billion. Total cash costs areexpected to be in the range of $580 to $610 per ounce due to labor rateincreases, higher royalty costs and increased costs related to dieselconsumption and maintenance due to fleet expansion at Kalgoorlie.

 

AtOsborne, copper production decreased by 14% to 75 million pounds from 87million in the prior year, at cash costs of $1.64 per pound compared to $1.36per pound in the prior year. Cost of sales applicable to copper increased by$13 million, or 12% compared to the prior year. Production was impacted by thehanging wall issues of the underground mine encountered during the year restrictingaccess to higher grade material. Production levels in 2009 are expected torange from 70 to 80 million pounds with total cash costs of $1.50 to 1.70 perpound. Cost of sales applicable to copper is expected to be in the range of$105 to $140 million.

 

**Africa**

** **

**KeyOperating Statistics**

 
| **For the years ended** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **        | ** ** | ** ** | ** ** |
|----------------------------------------|------------|------------|------------|------------|------------|-------------------|------------|------------|------------|
| **December 31**                   | ** ** | **2008**   | ** ** | **2007**   | ** ** | **% Change** | ** ** | **2006**   | ** ** |
| Tons mined (millions)                  | ** ** | **22**     |       | 23         |       | (4                | )%         | 21         |       |
| Ore tons processed (millions)          | ** ** | **4**      |       | 4          |       | 0                 | %          | 5          |       |
| Average grade (ozs/ton)                | ** ** | **0.154**  |       | 0.165      |       | (7                | )%         | 0.188      |       |
| Gold produced (000s/oz)                | ** ** | **545**    |       | 605        |       | (10               | )%         | 914        |       |
| Cost of sales ($ millions)        | ** ** | **$**      | **327**    |       | $          | 293               |       | 12         | %          | $ | 226 |   |
| Total cash costs (per oz)              | ** ** | **$**      | **560**    |       | $          | 405               |       | 38         | %          | $ | 312 |   |

 

----

| (6) | Effective first quarter  2008, the Darlot, Lawlers, and Granny Smith mines are being managed as a  single unit (Yilgarn South), with shared administrative services in order to  achieve operational and administrative efficiencies. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

44

----

 

Total gold production in2008 decreased by 10% compared to the prior year. At North Mara, production wasimpacted by equipment availability issues resulting from the excavator fire in January anddisruption due to local civil disturbances. At Bulyanhulu, lower staffinglevels in the first half of the year due to the illegal strike in fourthquarter 2007 led to delays in underground mining activities and limited ourability to access higher grade areas of the ore body. We returned to normalstaffing levels in the second half of 2008 and have continued to train the workforcein order to increase future productivity. At Tulawaka, production decreased 18%compared to the prior year as higher grade open pit operations came to an endin September and the start of underground mining was delayed due toventilation, remodeling and training issues resulting in a revised mine plan.

 

Costof sales applicable to gold increased by $34 million, or 12%, and total cashcosts per ounce for the region in 2008 were 38% higher than the prior year.Total cash costs per ounce increased primarily due to lower production drivenby lower throughput and recoveries at our higher cost mines. Cost of sales andtotal cash costs were also impacted by higher input costs due to inflationarypressures on labor, commodities, and consumables and lower copper by-productcredits at Bulyanhulu due to lower production levels.

 

In2009, we expect gold production in the range of 0.71 to 0.8 million ounces. Weexpect cost of sales applicable to gold to be in the range of $315 to $395million, or $445 to $495 per ounce on a total cash costs basis. Production isexpected to increase primarily due to the commencement of mining operations atBuzwagi in the second quarter and higher production expected at Bulyanhulu dueto ongoing training to increase mining productivity, partially offset by lowerproduction expected at Tulawaka due to the ceasing of open pit operations inthird quarter 2008. Cost of sales and total cash costs per ounce are expectedto be lower in 2009, reflecting the increase in production levels, andinclusion of lower cost Buzwagi production.

 

**CapitalProjects**

** **

**KeyOperating Statistics**

 
| **($ millions)**                                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|--------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| **For the years ended December 31** | ** ** | **2008**   | ** ** | **2007**   | ** ** | **2006**   | ** ** |
| Project expense                                              | ** ** | **$**      | **185**    |       | $          | 173        |       | $ | 111 |   |
| Project expense incurred by equity  investees                |       | **69**     |       | 14         |       | —     |       |
| Total project expense                                        | ** ** | **254**    |       | 187        |       | 111        |       |
| Capital expenditures(1)                                      | ** ** | **584**    |       | 169        |       | 211        |       |
| Capital commitments                                          | ** ** | **$**      | **552**    |       | $          | 159        |       | $ | 117 |   |

 

----

| (1) | Amounts presented represent  our share of capital expenditures on a cash basis, and exclude expenditures incurred  at our Cortez property (2008: $155 million, 2007: $75 million, and 2006: $47  million) which is not managed by the Capital Projects group. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

We spent $254 million inproject expenses and $584 million (our share) in capital expenditures in 2008.Project expenses primarily relate to activities undertaken to advance thePueblo Viejo ($62 million), Kainantu ($28 million), Pascua-Lama ($21 million)and Fedorova ($24 million) projects. Capital expenditures are mainlyattributable to our Buzwagi, Pueblo Viejo and Pascua-Lama projects. We expectcapital expenditures to increase in 2009 as construction activities at thesethree capital projects ramp up.

 

Projectexpenses incurred by equity investees reflect our share of expenditures relatedto the Reko Diq, Cerro Casale and Donlin Creek projects.

 

*Overview*

 

The recent volatility anddecline in prices for gold, copper, silver, platinum group metals, energy,foreign currencies, input commodities and consumables, steel and EngineeringProcurement Construction Management (EPCM) services could have a significantimpact on the pre-production capital costs, operating costs as well as theoverall development timeframe of our capital projects. Certain changes such asthe decline in the price of precious and base metals may have negative impacts,while others, such as the decline in prices for input commodities andconsumables, the strengthening of the US dollar and the increased availabilityand reduced cost of EPCM services may have positive impacts. In addition, the sharpcontraction in credit markets could result in higher financing costs if theseconditions persist for an extended period of time and could also impact ourproject development schedules.

 

45

----

 

Theimpact of a continuation of the present economic environment for commodityprices and credit markets is also potentially significant to our early stageprojects.

 

Thesignificant decrease in platinum group metals prices in fourth quarter 2008 hasnegatively impacted the economics of some of our projects, including Sedibeloand Fedorova. Similarly, the significant decline in nickel prices has impactedthe viability of our Kabanga project. We are currently reviewing the projecteconomics and timelines for these projects with a view towards optimizing ourdevelopment schedule in light of the market environment. We will also need toconsider the views of our partners on the projects.

 

*Projects*

 

The Buzwagi project inTanzania was 90% complete at year end and is on schedule to pour first gold insecond quarter 2009 in line with its pre-production capital budget of about$400 million, contributing about 200 thousand ounces in 2009 at total cashcosts of about $320 to $335(7) per ounce.

 

ThePueblo Viejo project in the Dominican Republic is advancing on schedule andwithin its preproduction capital budget of approximately $2.7 billion (100%basis)(8), with initialproduction anticipated in the fourth quarter of 2011. Barrick’s 60% share ofannual gold production in the first full five years of operation is expected tobe about 600 to 650 thousand ounces at total cash costs of about $275 to $300(7) perounce. Pueblo Viejo is a long life asset with an expected mine life of over 25years and we continue to find new reserves.

 

AtPascua-Lama, the majority of remaining key sectoral permits, including waterrights, have been granted by the government of San Juan province in Argentina.Progress was made on certain fiscal matters at the federal level; however, theresolution of cross-border taxation between Chile and Argentina remainsoutstanding. Work is ongoing, including project optimization, to finalizeproject economics. The mix of silver and gold production provided for in themine plan and assumed silver prices will significantly impact estimated totalcash costs. Subject to resolution of cross-border taxation and other matters,we expect to provide updated details on the project economics in second quarter2009.

 

AtDonlin Creek, a large, undeveloped, refractory gold deposit in Alaska, apreferred design for the Donlin Creek project has been identified and afeasibility study update continues on schedule for completion by the firstquarter 2009 after which it may be approved or subject to further update. Theproject is expected to have a throughput design of approximately 50 thousandtonnes per day using onsite diesel and wind cogeneration for power.Pre-permitting activities are underway concurrent with the feasibility studyupdate.

 

AtSedibelo, a platinum project in South Africa, regulatory approval was obtainedenabling the transfer of the initial 10% stake in the property following thecompletion of a bankable feasibility study in 2008. During fourth quarter, theright to mine was granted by the Department of Minerals and Energy whichexpires in June 2009 if mining related activities have not commenced.

 

RekoDiq is a large copper-gold porphyry mineral deposit on the Tethyan belt,located in southwest Pakistan in the province of Baluchistan. The projectfeasibility study remains on schedule and is expected to be completed in thesecond half of 2009.

 

AtCerro Casale, one of the world’s largest undeveloped gold and copper depositslocated in the Maricunga district of Region III in Chile, 145 km southeast ofCopiapo, the pre-feasibility study was completed and indicated positivereturns. We expect to complete a full feasibility study by the end of thirdquarter 2009.

 

Kabangais one of the world’s largest undeveloped nickel sulfide deposits located inTanzania. Xstrata Nickel earned a 50% interest in the project under the earn-inagreement during the quarter. All future expenditures will be funded equally byXstrata Nickel and Barrick. We are committed to completing the final phase ofthe feasibility in 2009 at an expected cost of $40 million (100% basis).

 

----

| (7) | Based on an oil price of  $75 per barrel and life of mine HFO power.           |
|-----|--------------------------------------------------------------------------------|
| (8) | Pre-production, followed by  $0.3b to complete phased expansion to 24,000 tpd. |

 

46

----

 

**Review ofSignificant Operating Expenses**

 

**Exploration Expense**

 
| **($ millions)**                                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **                                                                                                                                                                                                       | ** ** |
|--------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| **For the years ended December 31** | ** ** | **2008**   | ** ** | **2007**   | ** ** | **2006**   | ** ** | **Comments on significant trends and variances**                                                                                                                                        | ** ** |
| Exploration                                                  |       |       |       |       |       |       |       |                                                                                                                                                                                                             |       |
| North America                                                | ** ** | **$**      | **69**     |       | $          | 66         |       | $                                                                                                                                                                                                                | 61         |   | Mainly due  to higher costs incurred at Cortez ($11 million), partially offset by lower  costs incurred at Goldstrike ($3 million) and the Grace Property ($5 million)  compared to the prior year. |   |
| South America                                                | ** ** | **40**     |       | 33         |       | 22         |       | Mainly due  to higher activity at Lagunas Norte ($4 million) and Zaldívar ($3 million). The  increase in 2007 over 2006 was due to higher activity at Lagunas Norte and Zaldívar.                      |       |
| Australia Pacific                                            | ** ** | **52**     |       | 46         |       | 44         |       | Mainly due  to higher activity at Osborne ($8 million) partially offset by Granny Smith  ($2 million).                                                                                                           |       |
| Africa                                                       | ** ** | **18**     |       | 15         |       | 22         |       | No  significant change from the prior year.                                                                                                                                                                      |       |
| Capital Projects/Global Exploration                          | ** ** | **25**     |       | 11         |       | 3          |       | Mainly due  to higher activity at Kainantu ($10 million) and the Pinson Property ($7  million) partially offset by lower expenditures at Pueblo Viejo ($3 million).                                              |       |
| Other                                                        | ** ** | **12**     |       | 8          |       | 19         |       | No  significant change from 2007. Lower expenditures in 2007 compared to 2006 were  mainly due to the sale of exploration properties to Highland and  discontinuation of active exploration in China and Turkey. |       |
| **Total**                                                    | ** ** | **$**      | **216**    |       | $          | 179        |       | $                                                                                                                                                                                                                | 171        |   |   |   |

 

**Project Development Expense**

 
| **($ millions)**               | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                     | ** ** |
|-------------------------------------|------------|------------|------------|------------|------------|------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| **For the years ended December 31** | ** ** | **2008**   | ** ** | **2007**   | ** ** | **2006**   | ** ** | **Comments on significant trends and variances**                                                                                                                                                                                                                                                                                                                      | ** ** |
| Mine development                    | ** ** | **$**      | **150**    |       | $          | 151        |       | $                                                                                                                                                                                                                                                                                                                                                                                              | 96         |   | In 2008, higher  expenditures at Kainantu ($27 million) and Fedorova ($5 million)were largely offset by lower expenditures at  Donlin Creek ($33 million). The increase in 2007 over 2006 was due to  increased development activities at Pueblo Viejo (increase of $42 million),  and Sedibelo (increase of $12 million), partially offset by Donlin Creek  (decrease of $5 million). |   |
| Non-capitalizable project costs     | ** ** | **51**     |       | 32         |       | 15         |       | Non-capitalizable costs  mainly represent items incurred in the development/construction phase that  cannot be capitalized. 2008 expenditures increased due to additional spending  at the Pinson Property ($17 million) and Cortez Hills ($2 million). The  increase in 2007 over 2006 was due to an increase at Sedibelo ($11 million),  Porgera ($4 million) and South Arturo ($2 million). |       |
| Business development/other          | ** ** | **41**     |       | 5          |       | 8          |       | Higher expenses in 2008  reflect an increase in costs related to reserve development ($8 million),  corporate development projects ($4 million), research and development  spending ($8 million), information technology related to our projects ($7  million) and corporate efficiency programs such as the Business Process Improvement  project ($5 million).                               |       |
| **Total**                           | ** ** | **$**      | **242**    |       | $          | 188        |       | $                                                                                                                                                                                                                                                                                                                                                                                              | 119        |   |   |   |

 

47

----

 

**AmortizationExpense**

 
| **($ millions)**                     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                  | ** ** |
|-------------------------------------------|------------|------------|------------|------------|------------|------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| **For the years ended  December 31** | ** ** | **2008**   | ** ** | **2007**   | ** ** | **2006**   | ** ** | **Comments on significant trends and variances**                                                                                                                                                                                                                                            | ** ** |
| **Gold mines**                            |       |       |       |       |       |       |       |                                                                                                                                                                                                                                                                                        |       |
| North America                             | ** ** | **$**      | **350**    |       | $          | 314        |       | $                                                                                                                                                                                                                                                                                           | 247        |   | Lower  amortization reflects lower sales volumes across all our regions, an increase  in reserve estimates at Pierina resulting in reduced amortization rates and  lower amortization incurred at Eskay Creek, which is no longer in production,  partially offset by higher amortization at Cortez with the additional 40%  ownership and a full year of the additional ownership in Porgera compared to  2007. |   |
| South America                             | ** ** | **165**    |       | 234        |       | 127        |       |
| Australia Pacific                         | ** ** | **258**    |       | 239        |       | 186        |       |
| Africa                                    | ** ** | **62**     |       | 78         |       | 88         |       |
| **Copper mines**                          |       |       |       |       |       |       |       |                                                                                                                                                                                                                                                                                        |       |
| South America                             | ** ** | **66**     |       | 80         |       | 51         |       | Lower  amortization in South America reflects lower copper sales volumes in 2008 as  well as an increase in reserves at Zaldívar compared to the prior year.  Higher amortization in Australia is mainly due to a decrease in the reserve  base at Osborne compared to the prior year. |       |
| Australia Pacific                         | ** ** | **57**     |       | 39         |       | 17         |       |
| **Sub-total**                             | ** ** | **$**      | **958**    |       | $          | 984        |       | $                                                                                                                                                                                                                                                                                           | 716        |   |   |   |
| **Other**                                 | ** ** | **32**     |       | 20         |       | 19         |       | Reflects  amortization of corporate assets and the additional amortization related to  Barrick Energy.                                                                                                                                                                                      |       |
| **Total**                                 | ** ** | **$**      | **990**    |       | $          | 1,004      |       | $                                                                                                                                                                                                                                                                                           | 735        |   |   |   |

 

**ImpairmentCharges, Write-down of Investments, Corporate Administration, Interest Incomeand Interest Expense**

 
| **($ millions)**                                  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                     | ** ** |
|--------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| **For the years ended  December 31**              | ** ** | **2008**   | ** ** | **2007**   | ** ** | **2006**   | ** ** | **Comments on significant trends and variances**                                                                                                                                                                                                                                                                                                                                               | ** ** |
| **Impairment charges**                                 | ** ** | **$**      | **749**    |       | $          | 42         |       | $                                                                                                                                                                                                                                                                                                                                                                                              | 17         |   | Impairment  charges in 2008 reflect the charges taken for goodwill ($678 million) and  impairments of long-lived assets ($71 million). Refer to page 65 of this  MD&A for further information on goodwill impairment charges. |   |
| **Write-down of investments**                          | ** ** | **205**    |       | 23         |       | 6          |       | In 2008, we  recorded an impairment charge on our investment in Highland Gold ($140  million), on Asset-Backed Commercial Paper ($39 million) which was  subsequently reversed into Other Income, and various other investments in  junior gold mining companies ($26 million). In 2007, we recorded an  impairment charge on Asset Backed Commercial Paper of $20 million.                    |       |
| **Corporate administration**                           | ** ** | **155**    |       | 155        |       | 142        |       | No  significant change from the prior year. The increase in 2007 over 2006 was due  to the strengthening of the Canadian dollar vs. the US dollar as costs are primarily  in Canadian dollars.                                                                                                                                                                                                 |       |
| **Interest income**                                    | ** ** | **39**     |       | 141        |       | 110        |       | Decrease is  mainly due to lower average cash balances in 2008.                                                                                                                                                                                                                                                                                                                                |       |
| **Interest expense**                                   |       |       |       |       |       |       |       |                                                                                                                                                                                                                                                                                                                                                                                           |       |
| Total incurred                                         | ** ** | **243**    |       | 237        |       | 251        |       | Slight increase  in 2008 reflects additional interest incurred as part of the bond issuance in  third quarter 2008 used to repay the drawdown of $990 million credit facility  to finance the additional 40% interest in Cortez, partially offset by lower interest  payments due to the repayment of $500 million, 7.5% debentures in 2007 and  lower interest on Veladero financing in 2008. |       |
| Capitalized                                            | ** ** | **222**    |       | 124        |       | 102        |       | Higher costs  capitalized in 2008 related to Cortez Hills ($40 million), Cerro Casale ($41  million), Buzwagi ($11 million), Kainantu ($7 million) and Pueblo Viejo ($3  million) partially offset by a decrease at Pascua-Lama ($4 million).                                                                                                                                                  |       |
| Interest expense allocated to discontinued  operations |       | —     |       | —     |       | 23         |       | Interest  expense in 2006 related to South Deep.                                                                                                                                                                                                                                                                                                                                               |       |
| Expensed                                               | ** ** | **$**      | **21**     |       | $          | 113        |       | $                                                                                                                                                                                                                                                                                                                                                                                              | 126        |   |   |   |

 

48

----

 

**Income Tax**

 
| **(percentages)**                                                 | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|-------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| **For the years ended  December 31**                         | ** ** | **2008**   | ** ** | **2007**   | ** ** | **2006**   | ** ** |
| Effective tax rate on ordinary income                             | ** ** | **30**     | **%**      | 28         | %          | 23         | %          |
| Impairment charges                                                | ** ** | **13**     | **%**      | 1          | %          | —     |       |
| Net currency translation (gains)/losses on  deferred tax balances |       | **5**      | **%**      | (4         | )%         | (1         | )%         |
| Deliveries into Corporate Gold Sales  Contracts                   |       | **—** | ** ** | 7          | %          | 4          | %          |
| Canadian tax rate changes                                         |       | **—** | ** ** | 3          | %          | 1          | %          |
| Release of deferred tax valuation allowances                      |       | **(7**     | **)%**     | (12        | )%         | (3         | )%         |
| Impact of change in Australian tax status                         |       | **—** | ** ** | —     |       | (2         | )%         |
| Actual effective tax rate                                         | ** ** | **41**     | **%**      | 23         | %          | 22         | %          |

 

Our effective tax rate onordinary income increased from 28% to 30% in 2008 primarily due to highermarket gold prices, the impact of changes in the mix of production, and on themix of taxable income in the various tax jurisdictions where we operate. In2007 we released valuation allowances totaling $156 million in Tanzania due tothe impact of higher market gold prices on expected levels of taxable income inTanzania.

 

*CurrencyTranslation*

 

Deferred tax balances aresubject to remeasurement for changes in currency exchange rates each period.The most significant balances are Canadian deferred tax assets with a carryingamount of approximately $334 million and Australian and Papua New Guinea netdeferred tax liabilities with a carrying amount of approximately $118 million.In 2007, the appreciation of the Canadian and Australian dollar against the USdollar resulted in net translation gains arising totaling $76 million. Thesegains are included within deferred tax expense/recovery. In 2008, following thestrengthening of the US dollar, we recorded translation losses of $98 million.

 

Infourth quarter 2008, Barrick Gold Corporation filed an election under Canadiandraft legislation to prepare its Canadian tax return using US dollars as thefunctional currency effective 2008. Upon the expected enactment of thelegislation in early 2009, we will be recording a one-time benefit ofapproximately $50 to $60 million.

 

*CanadianTax Rate Changes*

 

In the second and fourthquarters of 2007 and the second quarter of 2006, federal rate changes wereenacted in Canada that lowered the applicable tax rate. The impact of this taxrate change was to reduce net deferred tax assets in Canada by $64 million in2007 and $35 million in 2006 which are recorded as a component of deferredincome tax expense in the respective year. Also, in second quarter 2006, due toa change in the tax status of a Canadian subsidiary, we recorded a deferredincome tax credit of $23 million to reflect the impact on the measurement ofdeferred income tax assets and liabilities.

 

*Change inTax Status in Australia*

 

In first quarter 2006, aninterpretative decision (“ID”) was issued by the Australia Tax Office thatclarified the tax treatment of currency gains and losses on foreign denominatedliabilities. Under certain conditions, for taxpayers who have made thefunctional currency election, and in respect of debt that existed at the timethe election was made, the ID provided clarification that unrealized foreignexchange gains that currently exist on inter-company debt will not crystallizeupon repayment of the debt. The effect of the ID was recorded as a $31 millionreduction of deferred tax liabilities.

 

49

----

 

**FinancialOutlook**

 

**2009Guidance**

 
| ** **                                                             | ** ** | **2008**        | ** ** | **2009**               | ** ** |
|------------------------------------------------------------------------|------------|-----------------|------------|------------------------|------------|
| ** **                                                             | ** ** | **Actual**      | ** ** | **Guidance**           | ** ** |
| Gold                                                                   |       | ** **      | ** ** | ** **             | ** ** |
| Production (millions of ounces)                                        | ** ** | **7.7**         | ** ** | **7.2–7.6**       | ** ** |
| Cost of sales                                                          | ** ** | **$3,426**      | ** ** | **$3,200–$3,600** | ** ** |
| Total cash costs ($ per ounce)                                    | ** ** | **$ 443**  | ** ** | **$450–$475**     | ** ** |
| Total cash costs – full credit non-gold  sales ($ per ounce) | ** ** | **$ 337**  | ** ** | **$360–$385**     | ** ** |
| Amortization ($ per ounce)                                        | ** ** | **115**         | ** ** | **$115–$120**     | ** ** |
| Copper                                                                 |       | ** **      | ** ** | ** **             | ** ** |
| Production (millions of pounds)                                        | ** ** | **370**         | ** ** | **375–400**       | ** ** |
| Cost of sales                                                          | ** ** | **$ 436**  | ** ** | **$470–$540**     | ** ** |
| Total cash costs ($ per pound)                                    | ** ** | **$ 1.19** | ** ** | **$1.25–$1.35**   | ** ** |
| Amortization ($ per pound)                                        | ** ** | **$ 0.33** | ** ** | **$0.20–$0.25**   | ** ** |
| Corporate  administration                                              | ** ** | **$ 155**  | ** ** | **$160**               | ** ** |
| Exploration expense                                                    | ** ** | **$ 216**  | ** ** | **$150–$160**     | ** ** |
| Project expense(1) (including equity  pick-up)                    | ** ** | **$ 229**  | ** ** | **$250–$270**     | ** ** |
| Other expense                                                          | ** ** | **$ 295**  | ** ** | **$200**               | ** ** |
| Interest income                                                        | ** ** | **$ 39**   | ** ** | **$10**                | ** ** |
| Interest expense                                                       | ** ** | **$ 21**   | ** ** | **$30**                | ** ** |
| Capital expenditures – sustaining                                 | ** ** | **$ 890**  | ** ** | **$750–$850**     | ** ** |
| Capital expenditures – projects(2)                                | ** ** | **$ 937**  | ** ** | **$1,300–$1,500** | ** ** |
| Effective income tax rate                                              | ** ** | **30**          | **%**      | **30**                 | **%**      |

 

----

1.               RepresentsBarrick’s share of expenditures. For US GAAP purposes, 100% of expenditures arerecorded in project expense with a non-controlling interest credit for ourpartners’ share. In 2009, project expenditures are expected to be in the rangeof $350 to $$370 million, less $100 million attributable to our partner’sshare.

 

2.               RepresentsBarrick’s share of expenditures including capitalized interest of about $215million. For US GAAP purposes, capital expenditures are recorded on a 100%basis, with funding from our partners for their share of expenditures recordedas an inflow in other financing activities in the consolidated statement ofcash flows. In 2009, capital expenditures – projects is expected to be in therange of $1.7 to $1.9 billion including our partner’s share of $400 million aswell as capitalized interest of approximately $250 million. Our 2009 guidancerange could increase depending upon progress at Pascua-Lama.

 

**OutlookAssumptions and Economic Sensitivity Analysis**

 
| ** **                                     | ** ** | **2009**       | ** ** | ** **   | ** **                                                                                                                                                                                                                                                |
|------------------------------------------------|------------|----------------|------------|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                                     | ** ** | **Guidance**   | ** ** | ** **   | ** **                                                                                                                                                                                                                                                |
| **Sensitivity**                                | ** ** | **Assumption** | ** ** | **Comments** | ** **                                                                                                                                                                                                                                                |
| Market gold price impact on reported  revenues |       | $              | 850/oz     |         | A $50/oz  increase/decrease in the market gold price causes reported revenues to  increase/decrease by $365 million, assuming production at the mid-point of  our 2009 guidance range.                                                                    |   |
|                                           |       |           |       |         |                                                                                                                                                                                                                                                      |
| Crude oil price impact on cost of sales        |       | $              | 50/bbl     |         | In 2009, we  are largely protected against movements in the market price for oil due to  the combination of our financial fuel contracts and our Barrick Energy  production, which together provide us with an economic hedge against rising oil  prices. |   |

 

**2009Guidance Analysis**

 

**Production**

 

We prepare estimates offuture production based on mine plans that reflect the expected method by whichwe will mine reserves at each mine. Actual gold and copper production may varyfrom these estimates due to a number of operational factors, including if thevolume and/or grade of ore mined differs from estimates, which could occurbecause of: changing mining rates; ore dilution; varying metallurgical andother ore characteristics; and short-term mining conditions that requiredifferent sequential development of ore bodies or mining in different areas ofthe mine. Certain non-operating factors, including litigation risk, regulatoryenvironment and the impact of global economic conditions may also cause actualproduction to vary from guidance. Mining rates are also impacted by variousrisks and hazards inherent at each operation, including natural phenomena, suchas inclement weather conditions, floods and earthquakes, and unexpected civildisturbances, labor shortages or strikes.

 

Weexpect 2009 gold production of about 7.2 to 7.6 million ounces and copper production of about375 to 400 million pounds. Lowergold production is expected primarily in North America as a result of lowerproduction at Goldstrike, Ruby Hill, and Golden Sunlight, partly offset byincreased production in Africa as production at Buzwagi is expected to begin insecond quarter 2009. Production in South America and Australia is expected tobe similar to 2008 levels. Production and cash costs during the year areexpected to vary due to mine sequencing. As a result, first quarter operatingperformance is anticipated to be weaker with expected improvement throughoutthe remainder of the year reflecting the ramp up at Buzwagi, the crusherexpansion at Veladero and higher expected grades from both Veladero and LagunasNorte.

 

Beyond2009, we expect gold production in 2010 to increase to about 7.7 to 8.1 millionounces with the production startup of Cortez Hills, at expected lower cashcosts.

 

50

----

 

**Cost ofSales and Total Cash Costs**

 

We prepare estimates of costof sales and total cash costs based on expected costs associated with mine plansthat reflect the expected method by which we will mine reserves at each mine.Cost of sales and total cash costs per ounce/pound are also affected by oremetallurgy that impacts gold and copper recovery rates, labor costs, the costof mining supplies and services, foreign currency exchange rates and strippingcosts incurred during the production phase of the mine. In the normal course ofour operations, we attempt to manage each of these risks to mitigate wherepossible, the effect they have on our operating results. The following tableprovides a reconciliation of our cost of sales guidance to our total cash costsguidance.

 

**Reconciliationof Cost of Sales Guidance to Total Cash Costs per Ounce/Pound Guidance**

 
| ** **                                                          | ** ** | **Gold**           | ** ** | **Copper**       | ** ** |
|---------------------------------------------------------------------|------------|--------------------|------------|------------------|------------|
| Cost of sales ($ millions)                                     |       | $3,200–$3,600 |       | $470–$540   |       |
| Production (millions of ounces/lbs)                                 |       | 7.2–7.6       |       | 375–400     |       |
| Total cash costs ($ per ounce/per lb)                          |       | $450–$475     |       | $1.25–$1.35 |       |
| Expected copper margin per ounce ($ per  ounce)                |       | $90                |       | —           |       |
| Total cash costs on a full non-gold sales basis  ($ per ounce) |       | $360–$385     |       | —           |       |

 

Cost of sales applicable togold is expected to be in the range of $3.2 billion to $3.6 billion, and costof sales applicable to copper is expected to be about $470 million to $540million. Total cash costs are expected to be in the range of $450 to $475 perounce, $360 to $385 per ounce on a full non-gold sales basis, and $1.25 to$1.35 per pound for copper. Gold total cash costs in 2009 are forecast to be about4% higher than 2008 primarily due to lower production levels as a result of adecrease in gold recovery rates; an increase in waste tons mined; and lowersilver and copper by-product credits as a result of decreases in realizedprices and the closure of Eskay Creek in first quarter 2008. These costincreases are expected to be partially offset by lower royalties and productiontaxes and lower energy costs. Total cash costs and total cash costs on a fullcredit non-gold sales basis for 2009 include currency/fuel hedge opportunitylosses totaling about $30 per ounce based on a spot oil price assumption of $50per barrel (WTI) and a US dollar to Australian dollar exchange rate assumptionof $0.70.

 

 

----

(1)   Chart depicts approximate impacts of each category on total cashcosts per ounce.

 

Total cash costs for copperare expected to be approximately $0.06 to $0.16 per pound higher than 2008,primarily as a result of increased costs for electricity and acid at Zaldívar.Total cash costs in 2009 include currency/fuel hedge losses of about $0.04 perpound.

 

**Exploration**

 

Lower costs are expected in2009 primarily due to reduced global exploration activities due to a focus onmore near-term opportunities and mine site exploration expenditures at Kanowna,Osborne, Round Mountain, Zaldívar, and Lagunas Norte.

 

**ProjectExpenses**

 

Project expenses areclassified under a combination of project expenses and equity methodinvestments on our income statement. In aggregate, we expect to expenseapproximately $250 to $270 million for our share of expenditures in 2009. In2009, our expected project expenses are primarily attributable to ourcommitment to complete the feasibility studies at Reko Diq, Cerro Casale,Donlin Creek and Kabanga, as well as the development costs associated with theextension of the mine life at Golden Sunlight.

 

51

----

 

Thetiming of the funding for project expenditures through equity methodinvestments and the subsequent expense recognition vary. The funding isinitially recorded as an increase in the carrying amount of our investment. Ourshare of expenses is recognized as amounts are spent on the projects through “equityinvestees” in our consolidated statement of income.

 

**OtherExpense**

 

The decrease in otherexpenses is primarily due to non-hedge derivative losses and currencytranslation losses recorded in 2008, which are not included in our estimated2009 guidance.

 

**InterestIncome and Interest Expense**

 

We expect lower interestincome in 2009 primarily due to lower market interest rates and lower averagecash balances. We expect higher interest expense in 2009 mainly due to anincrease in net debt outstanding of $689 million.

 

**CapitalExpenditures**

 

*Projects*

 

The expected increase incapital expenditures is mainly due to higher expenditures at the Pueblo Viejo,Cortez Hills, and Pascua-Lama projects, partly offset by the completion of theBuzwagi project. At the Pueblo Viejo and Cortez Hills projects, constructionactivities are expected to accelerate significantly in 2009.

 

*SustainingCapital*

 

Sustaining capital expendituresfor the mine sites as well as the corporate office and RBU offices are expectedto be in line with the 2008 expenditure levels.

 

**Income TaxRate**

 

Our expected effective taxrate excludes the impact of currency translation gains/losses and changes intax valuation allowances. We do not anticipate any signifi-cant change in oureffective tax rate for 2009.

 

**Review ofQuarterly Results**

 

**Quarterly Information**

 
| ** **                                                   | ** ** | **2008**  | ** ** | **2007**   | ** ** |
|--------------------------------------------------------------|------------|-----------|------------|------------|------------|
| **($ millions, except where indicated)** | ** ** | **Q4**    | ** ** | **Q3**     | ** ** | **Q2** | ** ** | **Q1** | ** ** | **Q4** | ** ** | **Q3** | ** ** | **Q2** | ** ** | **Q1** | ** ** |
| Sales(1)                                                     | ** ** | **$**     | **2,110**  | ** ** | **$**      | **1,878** | ** ** | **$** | **1,967** | ** ** | **$** | **1,958** |   | $ | 1,917 |   | $ | 1,684 |   | $ | 1,642 |   | $ | 1,089 |   |
| Realized price – gold                                   | ** ** | **807**   | ** ** | **872**    | ** ** | **894** | ** ** | **925** |   | 798 |   | 681 |   | 624 |   | 386 |   |
| Realized price – copper                                 | ** ** | **3.06**  | ** ** | **3.49**   | ** ** | **3.65** | ** ** | **3.54** |   | 3.11 |   | 3.38 |   | 3.43 |   | 2.77 |   |
| Cost of sales                                                | ** ** | **1,191** | ** ** | **1,028**  | ** ** | **882** | ** ** | **775** |   | 834 |   | 794 |   | 776 |   | 740 |   |
| Net income/(loss)                                            | ** ** | **(468**  | **)**      | **254**    | ** ** | **485** | ** ** | **514** |   | 537 |   | 345 |   | 396 |   | (159 | ) |
| Per share(2) – (dollars)                                | ** ** | **(0.54** | **)**      | **0.29**   | ** ** | **0.56** | ** ** | **0.59** |   | 0.62 |   | 0.40 |   | 0.46 |   | (0.18 | ) |
| Adjusted net income(3)                                       | ** ** | **277**   | ** ** | **408**    | ** ** | **441** | ** ** | **537** |   | 597 |   | 293 |   | 318 |   | (181 | ) |
| Per share(2) – (dollars)                                | ** ** | **0.32**  | ** ** | **0.47**   | ** ** | **0.51** | ** ** | **0.62** |   | 0.69 |   | 0.34 |   | 0.37 |   | (0.21 | ) |
| EBITDA(4)                                                    | ** ** | **(a45**  | **)**      | **522**    | ** ** | **886** | ** ** | **984** |   | 793 |   | 710 |   | 740 |   | 193 |   |
| Operating cash flow                                          | ** ** | **$**     | **439**    | ** ** | **$**      | **508** | ** ** | **$** | **531** | ** ** | **$** | **728** |   | $ | 676 |   | $ | 557 |   | $ | 336 |   | $ | 163 |   |

 

----

1.               Perour consolidated financial statements.

2.               Calculatedusing weighted average number of shares outstanding under the basic method ofearnings per share.

3.               Adjustednet income is a non-GAAP financial performance measure with no standardizedmeaning under US GAAP. All prior quarters have been restated to reflect therevised definition of adjusted net income. For further information and adetailed reconciliation, please see page 72 of this MD&A.

4.               EBITDAis calculated by excluding income tax expense, interest expense, interestincome and amortization, and is a non-GAAP financial performance measure withno standardized meaning under US GAAP. For further information and a detailedreconciliation, please see page 75 of this MD&A.

 

52

----

 

Our financial results forthe last eight quarters reflect the following general trends: volatile spotgold and copper prices that impact realized sales price and higher productioncosts largely due to higher inflationary cost pressures.

 

**FourthQuarter Results**

 

In fourth quarter 2008 wereported a loss of $468 million, compared to net income of $537 million in theprior year period. The loss in fourth quarter 2008 was primarily driven bypost-tax impairment charges totaling $773 million. Adjusted net income infourth quarter 2008, which excludes the impact of impairment charges, was $277million lower than the prior year period, a decrease of 54%, as higher goldprices and higher sales volumes for gold and copper were offset by higher totalcash costs for gold and copper.

 

**ImpairmentCharges Related to Goodwill, Property, Plant and Equipment, and Investments**

 
| **($ millions)**                            | ** ** | ** ** | ** ** |
|--------------------------------------------------|------------|------------|------------|
| **For the three months ended  December 31** | ** ** | **2008**   | ** ** |
| Kanowna                                          |       | $          | 272        |   |
| North Mara                                       |       | 216        |       |
| Barrick Energy                                   |       | 88         |       |
| Osborne                                          |       | 104        |       |
| Highland                                         |       | 42         |       |
| Henty                                            |       | 30         |       |
| Other                                            |       | 21         |       |
| Total (net of tax)                               |       | $          | 773        |   |

 

In fourth quarter 2008, wesold 2.19 million ounces of gold and 105 million pounds of copper, compared to2.04 million ounces and 93 million pounds in the same prior year quarter. Salesin fourth quarter were higher than the same prior year period reflecting highermarket prices and higher sales volumes for both copper and gold. In fourthquarter 2008, cost of sales attributable to gold was $1,058 million or $471 perounce on a total cash cost basis, an increase of $300 million or $102 per ouncefrom the prior year. As expected, gold production and cost of sales/total cashcosts per ounce in fourth quarter 2008 were impacted by mine sequencing,inflationary pressures for items such as labor, energy, and commodities andconsumables, gold-related costs and opportunity losses on currency andcommodity hedge contracts. Total cash costs on a full credit for non-gold salesincreased by $117 per ounce to $382 per ounce, compared to $265 per ounce inthe prior year.

 

Operatingcash flow in fourth quarter was $439 million, or 35% lower than the same prioryear period reflecting lower cash margins on copper and gold, as well as higherworking capital outflows.

 

**FinancialCondition Review**

 

**SummaryBalance Sheet and Key Financial Ratios**

 
| **($ millions, except ratios)**               | ** ** | ** **      | ** ** | ** **  | ** ** |
|--------------------------------------------------------------|------------|-----------------|------------|-------------|------------|
| **For the years ended December 31** | ** ** | **2008**        | ** ** | **2007**    | ** ** |
| Total cash and cash equivalents                              | ** ** | **$**           | **1,437**  |        | $          | 2,207 |   |
| Total current assets                                         | ** ** | **4,112**       |       | 4,299       |       |
| Total current liabilities                                    | ** ** | **1,844**       |       | 1,296       |       |
| Working capital                                              | ** ** | **2,268**       |       | 3,003       |       |
| Total assets                                                 | ** ** | **24,161**      |       | 21,951      |       |
| Total liabilities                                            | ** ** | **8,702**       |       | 6,613       |       |
| Net debt(1)                                                  | ** ** | **$**           | **2,889**  |        | $          | 941 |   |
| Total shareholders’ equity                              | ** ** | **$**           | **15,277** |        | $          | 15,256 |   |
| Total common shares outstanding(2)                           | ** ** | **872,723,090** |       | 870,465,549 |       |
| **Key Financial Ratios:**                                    |       |            |       |        |       |
| Current ratio(3)                                             | ** ** | **2.23:1**      |       | 3.32:1      |       |
| Debt-to-market capitalization(4)                             | ** ** | **0.14:1**      |       | 0.09:1      |       |
| Debt-to-book value(5)                                        | ** ** | **0.19:1**      |       | 0.15:1      |       |
| Debt-to-equity(6)                                            | ** ** | **0.30:1**      |       | 0.22:1      |       |

 

----

1.               Representstotal long-term debt of $4,326 million (2007: $3,148 million) excluding fairvalue adjustments less total cash and cash equivalents of $1,437 million($2,207 million) as at December 31, 2008.

2.               Totalcommon shares outstanding does not include: special voting shares 1 (2007:1),scheduled to be cancelled at the end of February 2009, Stock options13,350,011 (2007: 12,706,450) and Exchangeable shares 503,251 (2007: 3,465,892)which represent Barrick Gold Inc. (“BGI”) exchangeable shares. Each BGI shareis exchangeable for 0.53 Barrick common shares. At January 30, 2009, theseshares were convertible into approximately 266,929 (2007: 1,836,923) Barrickcommon shares. Each BGI share is scheduled to be redeemed at the end of February 2009.

3.               Representscurrent assets divided by current liabilities as at December 31, 2008 and December 31,2007.

4.               Representstotal debt divided by total market capitalization (share price as at December 31times the total common shares outstanding) as at December 31, 2008 and December 31,2007.

5.               Representstotal debt divided by Total Liabilities and Shareholders’ Equity as at December 31,2008 and December 31, 2007.

6.               Representstotal debt divided by Total Shareholders’ Equity as at December 31, 2008and December 31, 2007.

 

53

----

 

**BalanceSheet Review**

 

Total assets were $24.1billion in 2008, an increase of $2.2 billion or 10.1% compared to the prioryear. The increase primarily reflects an increase of $3.0 billion in property,plant and equipment due to the acquisition of a 40% interest in Cortez, theacquisition of Barrick Energy and sustaining and project capital expenditures.These increases were partially offset by a decrease in goodwill, reflecting theimpairment charges recorded in fourth quarter 2008, and a decrease in cash andequivalents, which was utilized to partially finance our acquisition activityin 2008. Total liabilities increased by $2.1 billion, or 32% compared to theprior year, primarily due to an increase in long term debt of $1.2 billion reflectingthe issuance of fixed rate notes in third quarter 2008 to pay down our line ofcredit, which was utilized for the Cortez and Barrick Energy transactions.

 

Ourasset base is primarily comprised of non-current assets such as property, plantand equipment and goodwill, reflecting the capital intensive nature of themining business and our history of growing through acquisitions, productioninventories and cash and equivalents. We typically do not carry a materialaccounts receivable balance, since only sales of concentrate have a settlementperiod.

 

**Shareholders’Equity**

 

For information regardingthe outstanding shares and stock options, please refer to the FinancialStatements and our 2008 Management Information Circular and Proxy Statement.

 

**DividendPolicy**

 

In 2008, we increased ourdividend from $0.30 per common share to $0.40 per common share. The 33%increase in the dividend reflects our ability to generate substantial cashflows from our operations in a high gold price environment. With strong cash flowand the industry’s only A-rated balance sheet, we determined that we have thefinancial resources to return additional value to shareholders while stillinvesting in advanced projects. The amount and timing of any dividends iswithin the discretion of our Board of Directors. The Board of Directors reviewsthe dividend policy semi-annually based on our current and projected liquidityprofile, and capital requirements for capital projects and potentialacquisitions.

 

**ComprehensiveIncome**

 

Comprehensive incomeconsists of net income or loss, together with certain other economic gains andlosses, that collectively are described as “other comprehensive income” or “OCI”,and excluded from the income statement.

 

In2008, other comprehensive losses of $507 million, after-tax, mainly included:losses of $301 million on hedge contracts designated for future periods, causedprimarily by changes in currency exchange rates, copper prices, and fuelprices; reclassification adjustments totaling $267 million for gains on hedgecontracts designated for 2008 that were transferred to earnings in 2008; $17million transferred to earnings related to gains recorded on the sale of sharesin various investments in junior mining companies, $26 million in lossestransferred to income due to the impairment of investments; $52 million oflosses recorded as a result of changes in the fair value of investments heldduring the year; and $54 million in losses for currency translation adjustmentson Barrick Energy.

 

Includedin accumulated other comprehensive income at December 31, 2008 wereunrealized pre-tax losses on currency, commodity and interest rate hedgecontracts totaling $213 million, based on December 31, 2008 market foreignexchange rates. The related hedge contracts are designated against operatingcosts and capital expenditures primarily over the next three years and areexpected to help protect against the impact of the strengthening of theAustralian and Canadian dollar against the US dollar. The hedge gains/lossesare expected to be recorded in earnings at the same time as the correspondinghedged operating costs and amortization of capital expenditures are alsorecorded in earnings.

 

54

----

 

**FinancialPosition**

 

We maintained a strongfinancial position throughout the market turbulence that was experienced in2008. This is reflected in our strong cash and working capital balances and ourlow debt to equity and debt to market capitalization ratios as at December 31,2008.

 

Ourstrong financial position is reflected in the fact that we have the onlyA-rated balance sheet in the gold mining industry as measured by S&P.Through 2008, our ratings, as established by S&P, Moody’s and DBRS, haveremained stable. Our ability to access unsecured debt markets and the relatedcost of debt financing is, in part, dependent upon maintaining an acceptablecredit rating. Deterioration in our credit rating would not adversely affectexisting debt securities, but could impact funding costs for any new debtfinancing.

 

**CreditRating from Major Rating Agencies**

 
| **At January 28, 2009:**                  | ** ** | ** **  | ** ** |
|------------------------------------------------|------------|-------------|------------|
| Standard and Poor’s (“S&P”) | ** ** | **A–** | ** ** |
| Moody’s                                   | ** ** | **Baa1**    | ** ** |
| DBRS                                           | ** ** | **A**       | ** ** |

 

The key factors impactingour financial position, and therefore our credit rating, include the following:

 

·                  Our market capitalization and the strength ofour balance sheet, including the amount of net debt and our debt-to-equityratio (refer to liquidity section of this MD&A for discussion of keyfactors impacting these measures in 2008);

 

·                  Our net cash flow, including cash generatedby operating activities (refer to liquidity section of this MD&A fordiscussion of key factors impacting these measures in 2008);

 

·                  Expected capital expenditure requirements andother off balance sheet commitments (refer to the guidance and off balancesheet arrangements section of this MD&A for discussion of key factorsimpacting these measures in future periods);

 

·                  The quantity of our gold reserves (refer to pages 141to 148 for more information); and

 

·                  Our geo-political risk profile.

 

**Liquidity**

 

Total cash and cashequivalents at the end of 2008 were $1.4 billion. At year end, our cashposition consisted of a mix of term deposits and treasury bills. Net debt was$2.9 billion, with a debt-to-equity ratio of 0.30:1. The majority of ouroutstanding long-term debt matures at various dates beyond 2012, withapproximately $300 million repayable in the period 2009 to 2012. Counterpartiesto debt and derivative instruments do not have unilateral discretionary rightsto accelerate repayment at earlier dates.

 

Ourprimary source of liquidity is operating cash flow, and over the past threeyears we have generated an average of about $2 billion per year. The principalrisk factor affecting operating cash flow is market gold and copper prices. Weare largely protected in 2009 from the decline in market copper prices by ourcopper hedge position; beyond 2009 we are subject to market prices. At presentproduction rates, if copper prices remain at present levels of $1.50 per pound,proceeds from copper sales in 2010 would decline by about $722 million fromlevels in 2008, partly offset by the positive impact of expected higher levelsof gold production and sales in 2010 to 7.7 to 8.1 million ounces.

 

Theprincipal uses of liquidity are sustaining capital expenditures, constructionactivities at capital projects, acquisitions, dividend payments and interestpayments. Sustaining capital expenditures have averaged about $0.7 billion peryear over the past three years and assuming 2008 dividend rates, dividendstotal about $0.35 billion per year. The balance of cash flow generated byoperations, after paying for sustaining capital and dividends, is available forinvestment in capital projects and acquisitions. We have invested $4.7 billionon capital projects and acquisitions in the past three years, partly financedby cash flow from operations and partly by new financings. We expect to spendabout $4.2 billion over the next four years to fund remaining constructionactivities at Buzwagi, Cortez Hills, Pueblo Viejo, and Pascua-Lama, partlyfunded by project financing for a portion of the construction cost of PuebloViejo and Pascua-Lama.

 

55

----

 

For Pueblo Viejo we are inactive discussions with a group of export credit agencies to put in place $1billion of project financing, including our partners’ share, which covers aportion of the total capital cost of the project. We have a $1.5 billion creditfacility available as a source of financing and we may also raise new financingif we undertake any other projects, acquisitions, or for other purposes.

 

Investmentsin capital projects and acquisitions will be subject to an internal capitalallocation review prior to proceeding with new expenditures. This reviewentails an assessment of our overall liquidity, the overall level of investmentrequired, and the prioritization of investments. The assessment also takes intoaccount expected levels of future operating cash flow and the cost andavailability of new financing. If copper remains at recent low levels and thereis a decline in market gold prices then this could impact the timing and amountof future investment in capital projects and/or acquisitions.

 

Alternativesfor sourcing our future capital needs include our significant cash position,credit facilities, future operating cash flow, project financings and debt orequity financings. These alternatives are continually evaluated to determinethe optimal mix of capital resources of our capital needs.

 

Inlight of the current global economic crisis, our ability to secure newfinancing for our expected capital needs for capital projects could besignificantly impacted, particularly if this situation persists for an extendedperiod of time. In particular:

 

·                  An increased cost of financing due torising credit spreads could have a negative impact on overall projecteconomics.

·                  A lack of availability of credit onacceptable terms could make it difficult for us to raise the capital requiredto build some or all of our projects on the timelines previously anticipated orat all.

·                  Our joint venture partners may alsohave difficulty securing funding for their share of project capitalrequirements which could impact the ability to build some of the projects.

 

**Sources andUses of Cash**

 

**Cash Inflow(Outflow) Summary**

 
| **($ millions)**                     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|-------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| **For the years ended  December 31** | ** ** | **2008**   | ** ** | **2007**   | ** ** | **2006**   | ** ** |
| Operating activities                      | ** ** | **$**      | **2,206**  | ** ** | $          | 1,732      |       | $ | 2,122 |   |
| Investing activities                      | ** ** | **(3,912** | **)**      | (1,562     | )          | (1,593     | )          |
| Financing activities                      | ** ** | **933**    | ** ** | (1,036     | )          | (1,347     | )          |
| Discontinued operations                   |       | —     | ** ** | 21         |       | 2,828      |       |
| Effects of exchange rates                 | ** ** | **3**      | ** ** | 9          |       | (4         | )          |
| Change in cash and equivalents            | ** ** | **$**      | **(770**   | **)**      | $          | (836       | )          | $ | 2,006 |   |

 

In 2008, net cash providedby operating activities totaled $2,206 million, an increase of $474 millioncompared to the prior year. Higher market gold and copper prices were partiallyoffset by lower sales volumes and higher cash costs for both gold and copper.

 

 

56

----

 

Cash used in investingactivities amounted to $3,912 million, primarily due to acquisitions andcapital expenditures, partially offset by proceeds received from the sale ofother investments. Significant investing activities in 2008 included the $1.7billion cash acquisition of the additional 40% interest in Cortez and the $460million cash acquisition of Barrick Energy. Capital expenditures, includingcapitalized interest, amounted to $1,776 million, of which $742 million weresustaining capital expenditures related to our operating mines and $739 millionrelated to our development projects on an equity basis.

 

**CapitalExpenditures(1)**

 
| **($ millions)**                                              | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|--------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| **For the years ended  December 31**                          | ** ** | **2008**   | ** ** | **2007**   | ** ** | **2006**   | ** ** |
| **Project capital expenditures**                                   |       |       |       |       |       |       |       |
| Pascua-Lama                                                        | ** ** | **$**      | **112**    |       | $          | 102        |       | $ | 44 |   |
| Cortez Hills                                                       | ** ** | **155**    |       | 75         |       | 47         |       |
| Buzwagi                                                            | ** ** | **273**    |       | 66         |       | —     |       |
| Pueblo Viejo                                                       | ** ** | **157**    |       | —     |       | —     |       |
| Kainantu                                                           | ** ** | **4**      |       | —     |       | —     |       |
| Sedibelo                                                           | ** ** | **38**     |       | —     |       | —     |       |
| Cowal                                                              |       | —     |       | —     |       | 141        |       |
| Ruby Hill                                                          |       | —     |       | —     |       | 26         |       |
| **Sub-total(2)**                                                   | ** ** | **$**      | **739**    |       | $          | 243        |       | $ | 258 |   |
| Capital expenditures attributable to  non-controlling interests(3) | ** ** | **104**    |       | —     |       | —     |       |
| **Total project capital expenditures**                             | ** ** | **$**      | **843**    |       | $          | 243        |       | $ | 258 |   |
| **Regional capital expenditures**                                  |       |       |       |       |       |       |       |
| North America                                                      | ** ** | **$**      | **161**    |       | $          | 143        |       | $ | 177 |   |
| South America                                                      | ** ** | **154**    |       | 195        |       | 244        |       |
| Australia Pacific                                                  | ** ** | **215**    |       | 218        |       | 202        |       |
| Africa                                                             | ** ** | **172**    |       | 106        |       | 85         |       |
| Other/Barrick Energy                                               | ** ** | **40**     |       | 17         |       | 12         |       |
| **Sub-total**                                                      | ** ** | **742**    |       | 679        |       | 720        |       |
| **Capitalized interest**                                           | ** ** | **191**    |       | 124        |       | 109        |       |
| **Total capital expenditures**                                     | ** ** | **$**      | **1,776**  |       | $          | 1,046      |       | $ | 1,087 |   |

 

----

(1)          Theseamounts are presented on a cash basis consistent with the amounts presented onthe Consolidated Statement of Cash Flows.

(2)          On anaccrual basis, our share of project capital expenditures is $937 millionincluding capitalized interest.

(3)          Amountreflects our partners’ share of expenditures at the Pueblo Viejo project on acash basis.

 

Cash provided by financingactivities for 2008 was $933 million, including proceeds of $1.25 billion ofproceeds from debt issuance in third quarter that was primarily used to repay amountsdrawn down on our lines of credit to finance the purchase of the additional 40%in Cortez and the acquisition of Cadence Energy Inc. These amounts werepartially offset by dividend payments of $349 million.

 

**FinancialInstruments**

 

We use a mixture of cash,long-term debt and shareholders’ equity to maintain an efficient capitalstructure and ensure adequate liquidity exists to meet the cash needs of ourbusiness. We use interest rate contracts to mitigate interest rate risk that isimplicit in our cash balances and outstanding long-term debt. In the normalcourse of business, we are inherently exposed to currency and commodity pricerisk. We use currency and commodity hedging instruments to mitigate theseinherent business risks. We also hold certain derivative instruments that donot qualify for hedge accounting treatment. These non-hedge derivatives aredescribed in note 20 to our Financial Statements. For a discussion of certainrisks and assumptions that relate to the use of derivatives, including marketrisk, market liquidity risk and credit risk, refer to notes 2 and 20 to ourFinancial Statements. For a discussion of the methods used to value financialinstruments, as well as any significant assumptions, refer to note 20 to ourFinancial Statements.

 

57

----

 

**Summary ofFinancial Instruments(1)**

As at and for the year endedDecember 31, 2008

 
| ** **                                            | ** ** | **Principal/**                       | ** **    |                                 | ** **           | **Gains/(losses)** |        | **Amounts**  |       |
|-------------------------------------------------------|------------|--------------------------------------|---------------|--------------------------------------|----------------------|--------------------|-------------|--------------|------------|
| **Financial**                                         | ** ** | **Notional**                         | ** **    | **Associated**                       | ** **           | **Recorded in**    | ** **  | **Recorded** | ** ** |
| **Instrument**                                        | ** ** | **Amount**                           | ** **    | **Risks**                            | ** **           | **Earnings**       | ** **  | **in OCI**   | ** ** |
| Cash and equivalents                                  |       | $                                    | 1,437 million |                                 | · Interest rate |               | $           | 39 million   |       | — |   |
|                                                  |       |                                 |          | · Credit                        |                 |               |        |         |       |
| Investments in available-for-sale securities          |       | $                                    | 31 million    |                                 | · Market        |               | $           | 17 million   |       | $ | (2 million | ) |
| Long-term debt                                        |       | $                                    | 4,443 million |                                 | · Interest rate |               | $           | (17 million  | )          | — |   |
| Hedging instruments – currency contracts         |       | C$ 286 million  A$4,709 million |          | · Market/liquidity              |                 | $                  | 121 million |         | $          | (508 million | ) |
|                                                  |       | CLP 52,023 million                   |          |                                 |                 |               |        |         |       |
| Hedging instruments – copper contracts           |       | 402 million lbs                      |          | · Market/liquidity· Credit |                 | $                  | 112 million |         | $          | 484 million |   |
| Hedging instruments – fuel and propane contracts |       | 4.9 million bbls                     |          | · Market/liquidity· Credit |                 | $                  | 33 million  |         | $          | (169 million | ) |
| Non-hedge derivatives                                 |       | various                              |          | · Market/liquidity              |                 | $                  | 41 million  |         | —     |   |
|                                                  |       |                                 |          | · Credit                        |                 |               |        |         |       |

 

----

(1) Refer to pages 58 to61 for information on gold and silver sales contracts.

 

**Off BalanceSheet Arrangements**

 

**ProjectGold Sales Contracts**

 

We have 9.5 million(9) ouncesof existing gold sales contracts. The contracting parties are bullion bankswhose business includes entering into contracts to purchase gold from miningcompanies. The terms of our gold and silver sales contracts enable us todeliver gold and silver whenever we choose over the primarily ten-year terms ofthe contracts. The forward sales prices on our Project Gold Sales Contractshave not been fully fixed, and thus remain sensitive to long-term interestrates. As part of our Master Trading Agreements (“MTAs”), Project Gold SalesContracts are not subject to any provisions regarding any financial go-aheaddecisions with construction, or any possible delay or change on the projects.

 

----

(9)          Includesfloating spot-price gold contracts under which we are committed to deliver 4.2million ounces of gold at spot prices less an average fixed-price adjustment of$529 per ounce.

 

**Key Aspectsof Project Gold Sales Contracts**

 
| **As at December 31, 2008**                              | ** ** | ** ** | ** ** |   |
|---------------------------------------------------------------|------------|------------|------------|--------|
| Weighted average future price(1)                              |       | $          | 364/ounce  |   |
| Mark-to-market value at December 31,  2008 (millions)(2) |       | $          | (4,865     | )      |
| Duration(3)                                                   |       | 2.2 years  |       |   |

 

----

(1)          Weightedaverage price based on current contract rates resetting from 2009 to 2017.

(2)          At aspot gold price of $870 per ounce and market interest rates.

(3)          Calculatedas the weighted average years from December 31, 2008 to the first interimreset date for both floating and fixed price contracts.

 

Included in the 9.5 millionounces committed under our Project Gold Sales Contracts are floating spotpricecontracts under which we are committed to deliver 4.2 million ounces of gold atfuture spot prices less an average price adjustment of $529 per ounce. ProjectGold Sales Contracts allow us to move positions between fixed and floatingprices. When a contract is converted from a fixed price to a floating price,the difference between the current market price of gold at the date ofconversion and the contracted forward sales price is locked-in; i.e. theunrealized loss is fixed. Thereafter, future increases and decreases in marketgold prices directly impact the final contract price. In a rising gold priceenvironment, we have the opportunity to improve the price of the contract(assuming the gold price appreciates at a rate more than contango) andparticipate in higher gold prices

 

58

----

 

by resetting a floatingprice contract to a fixed price contract. Conversely, a decline in gold pricesubsequent to the conversion would reduce the final contract price we receive.Therefore, floating price contracts increase our exposure to gold pricemovements, both upwards and downwards.

 

USdollar interest rates, gold lease rates, credit spreads relating to both thecounterparties and Barrick’s credit quality, and the economic impact on thecounterparties associated with funding Project Gold Sales Contracts with negativemark-to-market balances have a material impact on the difference between theforward gold price over the current spot price (“contango”), and, ultimately,the realized price under gold forward sales contracts entered into by Barrick.Low US dollar interest rates, higher gold lease rates and an increase in thecredit spreads compared to the prior year, may cause the Project Gold SalesContracts to be in backwardation when rates are reset, with the result that ourrealized price under the forward sales contracts will decrease as contractsreset over the next few years. We estimate that the impact of a continuation ofpresent unusual market conditions for US dollar interest rates, credit spreadsand gold lease rates in existence as at December 31, 2008 would lead to adecline in the weighted average future contract price by approximately $4 perounce in 2009 and approximately $15 per ounce in 2010 on the entire position.This was calculated assuming a constant spot gold price of $870 per ounce, thecurrent Project Gold Sales Contracts position as at December 31, 2008, andresetting contracts with current interim delivery dates in 2009 and 2010 to theend of 2010. In 2009, we have no significant exposure to gold lease rates, andabout one third of the Project Gold Sales Contracts are exposed to US dollarinterest rates and credit spreads.

 

*CounterpartyRisk*

 

If a counterparty to aProject Gold Sales Contract is unable to conduct transactions in an accessibleinternational bullion market due to causes beyond its control, including theinability of the counterparty to purchase gold in the open market or to fundany such purchase, and no commercially reasonable alternative means exist forthe counterparty to enter into transactions having the same effect, the counterpartyhas no obligation to extend the scheduled delivery date of such contract and,depending on the circumstances, this may result in early settlement of suchcontract. To date we have seen no evidence of lack of bullion availability withany of our counterparties.

 

Counterpartyrisk is the risk that a third party might fail to fulfill its performanceobligations under the terms of a financial instrument. Counterparty risk can beassessed both in terms of credit risk and liquidity risk. For cash andequivalents and accounts receivable, credit risk represents the carrying amounton the balance sheet, net of any overdraft positions.

 

Forderivatives, when the fair value is positive, this creates credit risk. Whenthe fair value of a derivative is negative, we assume no credit risk. However,liquidity risk exists to the extent a counterparty is no longer able to performin accordance with the terms of the contract due to insolvency. In cases wherewe have a legally enforceable master netting agreement with a counterparty,credit risk exposure represents the net amount of the positive and negativefair values for similar types of derivatives. For a net negative amount, weregard credit risk as being zero. A net positive amount for a counterparty is areasonable basis to measure credit risk when there is a legally enforceablemaster netting agreement. We mitigate credit and liquidity risk by:

 

·                  Entering into derivatives with highcredit-quality counterparties;

·                  Limiting the amount of exposure to each counterparty;and 

·                  Monitoring the financial condition ofcounterparties.

 

For our Project Gold SalesContracts, the insolvency of a counterparty could, in certain circumstances,lead to a requirement to settle transactions between ourselves and theinsolvent counterparty and may ultimately require the payment of a net amountby us to the counterparty. In determining the amounts owing as a consequence ofany such settlement, we would be entitled to claim contractual damages sufferedby us as a result of a counterparty default. These damages could include thecosts of effecting replacement trades with other counterparties that would putus in the same position as we would have been if the insolvent counterparty hadnot defaulted. A settlement caused by a counterparty insolvency event would nottrigger any crossdefaults under our other financial instruments.

 

59

----

 

Wecurrently have Project Gold Sales Contracts in place with 17 counterparties,which consist primarily of large commercial banks. We proactively manage ourexposure to individual counterparties in order to mitigate both credit andliquidity risks. As at December 31, 2008 no counterparty had in excess of 10%of the total ounce or mark-to-market position. Subsequent to December 31,2008, one counterparty represented 13% of the mark-to-market and total ounceposition due to an assignment of another counterparty position. Through December 31,2008, none of the counterparties with which we held outstanding contracts haddeclared insolvency. In the event of a potential counterparty default due toinsolvency, we would seek to have the contract reassigned to an alternativecounterparty who is better able to perform under the contract. In certaincircumstances, we have been able to assign contracts to alternativecounterparties to manage counterparty risk, and we expect that we will be ableto continue to do so to the extent creditworthy counterparties are willing totake on assigned contracts.

 

**SilverSales Contracts (fixed and floating)**

 

We also have 16 millionounces of silver sales contracts under which we are committed to deliver silverover the next ten years. 8.9 million of these silver sales contracts arefloating price contracts at spot prices, less an average fixedprice adjustmentof $4.61 per ounce. These floating spot-price contracts were previouslyfixedprice contracts, for which, under the price-setting mechanisms of theMTAs, we elected to receive a price based on the market silver spot price atthe time of delivery, adjusted by the difference between the spot price and thecontract price at the time of such election.

 

**Summary ofSilver Sales Contracts (fixed and floating)**

 
| **As at December 31, 2008**                   | ** ** | ** ** | ** ** |
|----------------------------------------------------|------------|------------|------------|
| Millions of silver ounces                          |       | 16.0       |       |
| Average future price(1)                            |       | $          | 8.36       |   |
| Mark-to-market value at December 31,  2008(2) |       | $          | (67        | ) |

 

----

(1)          Barrickmay choose to settle any silver sales contract in advance of the terminationdate at any time, at its discretion. Historically, delivery has occurred inadvance of the contractual termination date.

(2)          At aspot silver price of $10.79 per ounce.

 

**Key Termsof Gold and Silver Sales Contracts**

 

In all of our MTAs, whichgovern the terms of gold and silver sales contracts with our 17 counterparties,the following applies.

 

·                  The counterparties do not have unilateraldiscretionary “right to break” provisions.

·                  There are no credit downgrade provisions.

·                  We are not subject to any margin calls,regardless of the price of gold or silver.

·                  We have the right to settle our gold and silversales contracts on two days notice at any time during the life of thecontracts, or keep these forward gold and silver sales contracts outstandingfor up to 10 years.

·                  At our option, we can sell gold or silver atthe market price or the contract price, whichever is higher, up to thetermination date of the MTAs. Unless extended further, currently, 250 thousandounces have a termination date of January 2012, 550 thousand ounces have atermination date of December 2017, and the remaining 8.7 million ounceshave termination dates from 2018 to 2022.

 

The MTAs with ourcounterparties do provide for early close out of certain transactions in theevent of a material adverse change in our ability, or our principal hedgingsubsidiary’s ability, to perform our or its gold and silver delivery and otherobligations under the MTAs and related parent guarantees, a lack of gold orsilver market and for customary events of default such as covenant breaches,insolvency or bankruptcy. The principal financial covenants are:

 

·                  We must maintain a minimum consolidated networth of at least $2 billion (approximately $15 billion at year end). The MTAsexclude unrealized mark-to-market valuations in the calculation of consolidatednet worth.

·                  We must maintain a maximum long-term debt toconsolidated net worth ratio of less than 2:1; we have consistently been below1:1 for the entire year.

 

In all cases, under the termsof the MTAs, the period over which we are required to deliver gold is extendedannually by one year, or kept “evergreen”, regardless of the intended deliverydates, unless otherwise notified by the counterparty. This means that, witheach year that passes, the termination date of most MTAs is extended into thefuture by one year. In 2008, three

 

60

----

 

counterparties notified usthat they would not be extending the termination date by one year on the basisof credit conditions. All of these termination dates were 10 years or longer,which allows for a current/final termination date of 2017 or later.

 

Asspot gold prices increase or decrease, the value of our gold mineral reservesand amount of potential operating cash inflows generally increase or decrease.The unrealized mark-to-market loss on our fixedprice Project Gold SalesContracts also increases or decreases. The mark-to-market value represents thecancellation value of these contracts based on current market levels, and doesnot represent an immediate economic obligation for payment by us. Ourobligations under the Project Gold Sales Contracts are to deliver an agreedupon quantity of gold at a contracted price by the termination date of thecontracts (currently 2018 in most cases). Project Gold Sales Contracts are notrecorded on our balance sheet. The economic impact of these contracts isreflected in our Financial Statements within gold sales based on selling pricesunder the contracts at the time we record revenue from the physical delivery ofgold and silver under the contracts.

 

**Fair Valueof Derivative Positions**

 
| **As at  December 31, 2008**        | ** ** | **Unrealized**  | ** ** |
|------------------------------------------|------------|-----------------|------------|
| **($ millions)**                    | ** ** | **Gain/(Loss)** | ** ** |
| Fixed Price Gold Sales contracts         |       | $               | (2,661     | ) |
| Floating Spot-Price Gold Sales contracts |       | (2,204          | )          |
| Silver Sales Contracts                   |       | (67             | )          |
| Foreign currency contracts               |       | (501            | )          |
| Interest rate contracts                  |       | (8              | )          |
| Copper contracts                         |       | 654             |       |
| Fuel contracts                           |       | (185            | )          |
| Steel contracts                          |       | (3              | )          |
| **Total**                                |       | $               | (4,975     | ) |

 

**Commitmentsand Contingencies**

 

*CapitalExpenditures Not Yet Committed*

 

We expect to incur capitalexpenditures during the next five years for both projects and producing mines.The projects are at various stages of development, from primarily explorationor scoping study stage through to the construction execution stage. Theultimate decision to incur capital at each potential site is subject topositive results which allow the project to advance past decision hurdles.Three projects are at an advanced stage, namely Buzwagi, Cortez Hills andPueblo Viejo at December 31, 2008 (refer to pages 45 to 46 forfurther details).

 

**ContractualObligations and Commitments**

 
| ** **                                            | ** ** | **Payments due** | ** ** | ** ** | ** ** |
|-------------------------------------------------------|------------|-----------------------|------------|------------|------------|
| **($ millions)**                                 | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **2014 and** | ** ** | ** ** | ** ** |
| **As at December 31, 2008**                      | ** ** | **2009**              | ** ** | **2010**   | ** ** | **2011** | ** ** | **2012** | ** ** | **2013** | ** ** | **thereafter** | ** ** | **Total** | ** ** |
| Long-term debt(1)                                     |       |                  |       |       |       |   |   |   |   |   |   |   |   |   |   |
| Repayment of principal                                | ** ** | **$**                 | **68**     |       | $          | 30 |   | $ | 10 |   | $ | 130 |   | $ | 564 |   | $ | 3,460 |   | $ | 4,262 |   |
| Capital leases                                        | ** ** | **25**                |       | 21         |       | 9 |   | 4 |   | 5 |   | — |   | 64 |   |
| Interest                                              | ** ** | **260**               |       | 255        |       | 251 |   | 248 |   | 231 |   | 2,763 |   | 4,008 |   |
| Asset retirement obligations(2)                       | ** ** | **94**                |       | 94         |       | 82 |   | 89 |   | 58 |   | 1,017 |   | 1,434 |   |
| Operating leases                                      | ** ** | **12**                |       | 7          |       | 4 |   | 3 |   | — |   | — |   | 26 |   |
| Restricted share units                                | ** ** | **29**                |       | 37         |       | 57 |   | — |   | — |   | — |   | 123 |   |
| Pension benefits                                      | ** ** | **57**                |       | 29         |       | 24 |   | 24 |   | 24 |   | 116 |   | 274 |   |
| Other post-retirement obligations                     | ** ** | **3**                 |       | 3          |       | 3 |   | 3 |   | 2 |   | 11 |   | 25 |   |
| Derivative liabilities(3)                             | ** ** | **442**               |       | 225        |       | 132 |   | 77 |   | — |   | — |   | 876 |   |
| Purchase obligations for supplies and  consumables(4) | ** ** | **483**               |       | 269        |       | 175 |   | 93 |   | 82 |   | 62 |   | 1,164 |   |
| Capital commitments(5)                                | ** ** | **426**               |       | 77         |       | 26 |   | 10 |   | 12 |   | 1 |   | 552 |   |
| Social development costs                              | ** ** | **55**                |       | 7          |       | 7 |   | 3 |   | 3 |   | 95 |   | 170 |   |
| **Total**                                             | ** ** | **$**                 | **1,954**  |       | $          | 1,054 |   | $ | 780 |   | $ | 684 |   | $ | 981 |   | $ | 7,525 |   | $ | 12,978 |   |

 

----

(1)          Long-termDebt and Interest – Our debt obligations do not include any subjectiveacceleration clauses or other clauses that enable the holder of the debt tocall for early repayment, except in the event that we breach any of the termsand conditions of the debt or for other customary events of default. TheVeladero financing is collateralized by assets at the Veladero mine. Other thanthis security, we are not required to post any collateral under any debtobligations. The terms of our debt obligations would not be affected bydeterioration in our credit rating. Projected interest payments on variablerate debt were based on interest rates in effect at December 31, 2008.Interest is calculated on our long-term debt obligations using both fixed andvariable rates.

(2)          AssetRetirement Obligations – Amounts presented in the table represent theundiscounted future payments for the expected cost of asset retirementobligations.

(3)          DerivativeLiabilities – Amounts presented in the table relate to derivative contractsdisclosed under notes 2 and 20 to the Financial Statements. Payments related toderivative contracts cannot be reasonably estimated given variable marketconditions.

(4)          PurchaseObligations for Supplies and Consumables – Includes commitments related to newpurchase obligations to secure a supply of acid, tires and cyanide for ourproduction process.

(5)          CapitalCommitments – Purchase obligations for capital expenditures include only thoseitems where binding commitments have been entered into. Commitments at the endof 2008 mainly related to construction capital at Pueblo Viejo and Pascua-Lama.

 

61

----

 

*Litigationand Claims*

 

We are currently subject tovarious litigation as disclosed in note 29 to the Financial Statements, and wemay be involved in disputes with other parties in the future that may result inlitigation. If we are unable to resolve these disputes favorably, it may have amaterial adverse impact on our financial condition, cash flow and results ofoperations. 

 

**CriticalAccounting Policies and Estimates**

 

Management has discussed thedevelopment and selection of our critical accounting estimates with the AuditCommittee of the Board of Directors, and the Audit Committee has reviewed thedisclosure relating to such estimates in conjunction with its review of thisMD&A. The accounting policies and methods we utilize determine how wereport our financial condition and results of operations, and they may requiremanagement to make estimates or rely on assumptions about matters that areinherently uncertain.

 

Ourfinancial condition and results of operations are reported using accountingpolicies and methods prescribed by US GAAP. In certain cases, US GAAP allowsaccounting policies and methods to be selected from two or more alternatives,any of which might be reasonable yet result in our reporting materiallydifferent amounts. We exercise judgment in selecting and applying ouraccounting policies and methods to ensure that, while US GAAP compliant, theyreflect our judgment of an appropriate manner in which to record and report ourfinancial condition and results of operations.

 

**AccountingPolicy Changes in 2008**

 

This section includes adiscussion of significant accounting policy changes and critical accountingestimates that were adopted in our 2008 Financial Statements.

 

**FAS 157,Fair Value Measurements (FAS 157)**

 

In 2008, we implemented FAS157 for financial assets and financial liabilities that are measured at fairvalue on a recurring basis. The primary assets and liabilities that arerecognized and disclosed at fair value in accordance with the provisions of FAS157 are: available-for-sale securities; receivables from provisional copper andgold sales; derivate assets and derivative liabilities; held-to-maturityinvestments; equity method investments and long-term debt. The adoption of FAS157 has resulted in expanded disclosures about our fair value measurements forfinancial assets and financial liabilities recognized in our financial statements.However, the adoption of FAS 157 did not have an impact on the measurement offair value as our valuation methodology for these assets and liabilities isconsistent with the fair value framework established by FAS 157. Refer to note21 of the Consolidated Financial Statements for details of the adoption of FAS157 and related disclosures.

 

Wehave not applied the provisions of FAS 157 to nonfinancial assets andnonfinancial liabilities as permitted by the delay specified in FSP FAS 157-2.FSP FAS 157-2 delays the effective date of FAS 157 to fiscal years beginningafter November 15, 2008, for non-financial assets and liabilities, exceptfor items that are recognized or disclosed at fair value in the financialstatements on a recurring basis. Therefore, beginning in 2009 we will apply therequirements of FAS 157 to nonfinancial assets and nonfinancial liabilitiesthat we periodically measure at fair value under US GAAP, which willprincipally affect: goodwill, tangible and intangible assets measured and recognizedat fair value as a result of an impairment assessment; and nonfinancial assetsand nonfinancial liabilities recognized as a result of a business combination.The application of the provisions of FAS 157 is not expected to have asignificant impact on our methodology for measuring the fair value of theseassets and liabilities, but will result in expanded disclosures.

 

**Changes inFinancial Statement Presentation – Accretion expense**

 

In first quarter 2008, wemade a change to our accounting policy regarding the financial statementclassification of accretion expense. Prior to this change, we recordedaccretion expense at producing mines as a component of cost of sales andaccretion expense at closed mines as a component of other expense.

 

Beginningin first quarter 2008, we recorded accretion expense at producing mines andaccretion expense at closed mines in amortization and accretion on ourConsolidated Statements of Income.

 

62

----

 

**FutureAccounting Policy Changes**

 

This section includes adiscussion of future accounting changes that may have a significant impact onour Financial Statements.

 

**FAS 161,Disclosures about Derivative Instruments and Hedging Activities (FAS 161)**

 

In first quarter 2009, wewill begin applying the provisions of FAS 161 to our financial statement notedisclosures. FAS 161 requires entities to provide enhanced disclosures about (a) howand why an entity uses derivative instruments; (b) how derivativeinstruments and related hedged items are accounted for under FAS 133 and itsrelated interpretations; and (c) how derivative instruments and relatedhedged items affect an entity’s financial position; financial performance andcash flows. We are currently evaluating the impact of adopting FAS 161 on ournote disclosures related to derivative instruments and hedging activities.

 

**FAS 141(R),Business Combinations (FAS 141(R))**

 

In first quarter 2009, wewill begin applying the provisions of FAS 141(R), which replaced FAS 141, forbusiness combinations consummated after the effective date of December 15,2008. Early adoption of FAS 141(R) was not permitted. Under FAS 141(R),business acquisitions will be accounted for under the “acquisition method”,compared to the “purchase method” mandated by FAS 141.

 

Themore significant changes to Barrick’s accounting for business combinations thatwill result from applying the acquisition method include: (i) thedefinition of a business is broadened to include development stage entities,and therefore more acquisitions will be accounted for as business combinationsrather than asset acquisitions; (ii) the measurement date for equityinterests issued by the acquirer is the acquisition date instead of a few daysbefore and after terms are agreed to and announced, which may significantlychange the amount recorded for the acquired business if share prices differfrom the agreement and announcement date to the acquisition date; (iii) allfuture adjustments to income tax estimates will be recorded to income taxexpense, whereas under FAS 141 certain changes in income tax estimates wererecorded to goodwill; (iv) acquisition-related costs of the acquirer,including investment banking fees, legal fees, accounting fees, valuation fees,and other professional or consulting fees will be expensed as incurred, whereasunder FAS 141 these costs are capitalized as part of the business combination; (v) theassets acquired and liabilities assumed are recorded at 100% of fair value evenif less than 100% is obtained, whereas under FAS 141 only the controllinginterest’s portion is recorded at fair value; and (vi) the non-controllinginterest will be recorded at its share of fair value of net assets acquired,including its share of goodwill, whereas under FAS 141 the non-controllinginterest is recorded at its share of carrying value of net assets acquired withno goodwill being allocated.

 

**FAS 160,Non-controlling Interests in Consolidated Financial Statements (FAS 160)**

 

In first quarter 2009, wewill begin applying the provisions of FAS 160. Under FAS 160, thenon-controlling interest will be measured at 100% of the fair value of assetsacquired and liabilities assumed, for transactions consummated after theeffective date of December 15, 2008. Under current standards, thenon-controlling interest is measured at book value. For presentation anddisclosure purposes, non-controlling interests will be classified as a separatecomponent of shareholders’ equity. In addition, FAS 160 will change the mannerin which increases/decreases in ownership percentages are accounted for.Changes in ownership percentages will be recorded as equity transactions and nogain or loss will be recognized as long as the parent retains control of thesubsidiary. When a parent company deconsolidates a subsidiary but retains anon-controlling interest, the non-controlling interest is re-measured at fairvalue on the date control is lost and a gain or loss is recognized at thattime. Finally, under FAS 160, accumulated losses attributable to thenon-controlling interests are no longer limited to the original carryingamount, and therefore non-controlling interests could have a negative carryingbalance. The provisions of FAS 160 are to be applied prospectively with theexception of the presentation and disclosure provisions, which are to beapplied for all prior periods presented in the financial statements. Earlyadoption was not permitted. The effect of FAS 160 on our balance sheet in firstquarter 2009 will be a reclassification of non-controlling interests in theamount of $182 million as at December 31, 2008 to the shareholders’ equitysection of the consolidated balance sheet.

 

63

----

 

**CriticalAccounting Estimates and Judgments**

 

Certain accounting estimateshave been identified as being “critical” to the presentation of our financialcondition and results of operations because they require us to make subjectiveand/or complex judgments about matters that are inherently uncertain; or thereis a reasonable likelihood that materially different amounts could be reportedunder different conditions or using different assumptions and estimates.

 

**ReserveEstimates Used to Measure Amortization of Property, Plant and Equipment**

 

We record amortizationexpense based on the estimated useful economic lives of long-lived assets.Changes in reserve estimates are generally calculated at the end of each yearand cause amortization expense to increase or decrease prospectively. Theestimate that most significantly affects the measurement of amortization isquantities of proven and probable gold and copper reserves, because we amortizea large portion of property, plant and equipment using the units-of-productionmethod. The estimation of quantities of gold and copper reserves, in accordancewith the principles in Industry Guide No. 7, issued by the US Securitiesand Exchange Commission (“SEC”) is complex, requiring significant subjectiveassumptions that arise from the evaluation of geological, geophysical, engineeringand economic data for a given ore body. This data could change over time as aresult of numerous factors, including new information gained from developmentactivities, evolving production history and a reassessment of the viability ofproduction under different economic conditions. Changes in data and/orassumptions could cause reserve estimates to substantially change from periodto period. Actual gold and copper production could differ from expected goldand copper production based on reserves, and an adverse change in gold orcopper prices could make a reserve uneconomic to mine. Variations could alsooccur in actual ore grades and gold, silver and copper recovery rates fromestimates.

 

Akey trend that could reasonably impact reserve estimates is rising marketmineral prices, because the mineral price assumption used in preparing reserveestimates is calculated based on the trailing three-year average market price.As this assumption rises, it could result in an upward revision to reserve estimatesas material not previously classified as a reserve becomes economic at highergold prices. Following the recent trend in market gold prices over the lastthree years, the mineral price assumption used to measure reserves has alsobeen rising. The gold price assumption was $725 per ounce in 2008 (2007: $575per ounce; 2006: $475 per ounce). The copper price assumption was $2.00 perpound in 2008 (2007: $2.00 per pound).

 

Theimpact of a change in reserve estimates is generally more significant for minesnear the end of the mine life because the overall impact on amortization isspread over a shorter time period. Also, amortization expense is moresignificantly impacted by changes in reserve estimates at underground minesthan open-pit mines due to the following factors:

 

(i)             Undergrounddevelopment costs incurred to access ore at underground mines are significantand amortized using the units-of-production method; and

 

(ii)          Reservesat underground mines are often more sensitive to mineral price assumptions andchanges in production costs. Production costs at underground mines are impactedby factors such as dilution, which can significantly impact mining andprocessing costs per ounce.

 

64

----

 

**Impact ofHistoric Changes in Reserve Estimates on Amortization**

 
| ** **                                                                                                       | ** ** | **2008**                              |       | **2007**                               |       |
|------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|----------------------------------------|------------|
| **For the years ended  December 31  ($ millions, except reserves in millions of contained oz/pounds)** | ** ** | **Reserves  increase  (decrease)(1)** | ** ** | **Amortization  increase  (decrease)** | ** ** | **Reserves  increase  (decrease)(1)** | ** ** | **Amortization  increase  (decrease)** | ** ** |
| **Gold**                                                                                                         |       |                                  |       |                                   | ** ** |   |   |   |   |
| North America                                                                                                    | ** ** | **3.1**                               | ** ** | **$**                                  | **(9**     | **)** | 5.0 |   | $ | 3 |   |
| South America                                                                                                    | ** ** | **3.6**                               | ** ** | **(39**                                | **)**      | 0.1 |   | 23 |   |
| Australia Pacific                                                                                                | ** ** | **1.5**                               | ** ** | **(10**                                | **)**      | 3.5 |   | (2 | ) |
| Africa                                                                                                           | ** ** | **0.5**                               | ** ** | **(5**                                 | **)**      | 0.5 |   | (2 | ) |
| **Total Gold**                                                                                                   | ** ** | **8.7**                               | ** ** | **$**                                  | **(63**    | **)** | 9.1 |   | $ | 22 |   |
| **Copper**                                                                                                       |       |                                  |       |                                   | ** ** |   |   |   |   |
| Australia Pacific                                                                                                | ** ** | **(51**                               | **)**      | **10**                                 | ** ** | 89 |   | (6 | ) |
| South America                                                                                                    | ** ** | **750**                               | ** ** | **(4**                                 | **)**      | 255 |   | 10 |   |
| **Total Copper**                                                                                                 | ** ** | **699**                               | ** ** | **$**                                  | **6**      | ** ** | 344 |   | $ | 4 |   |

 

----

(1)          Eachyear we update our reserve estimates as at the end of the year as part of ournormal business cycle. Reserve changes presented were calculated at thebeginning of the applicable fiscal year and are in millions of containedounces.

 

**ImpairmentAssessments of Operating Mines, Development Projects and Petroleum &Natural Gas Properties**

 

We review and test the carryingamounts of assets when events or changes in circumstances suggest that thecarrying amount may not be recoverable. We group assets at the lowest level forwhich identifiable cash flows are largely independent of the cash flows ofother assets and liabilities. For each operating mine site/developmentproject/petroleum and natural gas property, all related assets are included ina single group for impairment testing purposes. If there are indications thatimpairment may have occurred at a particular mine site/developmentproject/petroleum and natural gas property, we compare the sum of theundiscounted cash flows expected to be generated from that minesite/development project/petroleum and natural gas property to its carryingamount. If the sum of undiscounted cash flows is less than the carrying amount,an impairment loss is recognized if the carrying amount of the individuallong-lived assets within the group exceeds their fair values. We used a longterm gold price of $850 per ounce (2007: $800 per ounce) and a long term copperprice of $1.50 per pound in 2009 and $2.00 per pound (2007: $2.00 per pound)thereafter, in preparing our cash flow estimates.

 

Long-livedassets subject to potential impairment at mine sites/developmentprojects/petroleum and natural gas properties include buildings, plant andequipment, and capitalized reserve acquisition and development costs, andamounts allocated to value beyond proven and probable reserves (“VBPP”). Forimpairment assessment purposes, the estimated fair value of buildings, plantand equipment is based on a combination of current depreciated replacement costand current market value. The estimated fair value of capitalized reserveacquisition, development costs and VBPP is determined using an income approach whichmeasures the present value of the related cash flows expected to be derivedfrom the asset.

 

In2008, due to volatile economic conditions we tested the long-lived assets atall of our mines/projects/properties for impairment, and as a result we identifiedour Marigold gold mine in North America, our Henty and Kanowna gold mines, andOsborne copper mine in Australia as being potentially impaired. Consequently,we compared the estimated fair value of the individual long-lived assets totheir carrying amount and as a result, recorded impairments of: Marigold $12million and Osborne $57 million.

 

65

----

 

**ImpairmentAssessments of Exploration Projects**

 

After acquisition, variousfactors can affect the recoverability of the capitalized cost of land andmineral rights, particularly the results of exploration drilling. The length oftime between the acquisition of land and mineral rights and when we undertakeexploration work varies based on the prioritization of our exploration projectsand the size of our exploration budget. If we conclude that an impairmentcondition may exist, we compare the sum of the undiscounted cash flows expectedto be generated from the project to its carrying amount. If the sum of theundiscounted cash flows is less than the carrying amount, an impairment chargeis recognized if the carrying amount of the individual long-lived assets withinthe group exceeds their fair value. For projects that do not have reliable cashflow projections, a market approach is applied. We are continuing with ourcurrent exploration projects as planned and have not noted any indication ofimpairment.

 

**Accountingfor Goodwill and Goodwill Impairment**

 

We allocate goodwill arisingfrom business combinations to reporting units acquired by preparing estimatesof the fair value of the entire reporting unit and comparing this amount to thefair value of assets (including identifiable intangible assets) and liabilitiesof the reporting unit as at the date of acquisition. The difference representsthe amount of goodwill allocated to each reporting unit. We believe thatgoodwill arises principally because of the following factors: (1) thegoing concern value implicit in the Company’s ability to sustain/grow itsbusiness by increasing reserves and resources through new discoveries whosepotential value was not identified at the time of acquisition; (2) theability to capture unique synergies from a business combination that can berealized from managing a portfolio of mines and mineral properties in the samegeographic region; and (3) the requirement to record a deferred taxliability for the difference between the assigned fair values and the tax basesof assets acquired and liabilities assumed in a business combination at amountsthat do not reflect fair value.

 

Wetest for impairment of goodwill on an annual basis in the fourth quarter of ourfiscal year and at any other time if events or a change in circumstancesindicate that it is more likely than not that the fair value of a reportingunit has been reduced below its carrying amount. Circumstances that couldtrigger an impairment test include, but are not limited to: a significantadverse change in the business climate or legal factors; an adverse action orassessment by a regulator; the likelihood that a reporting unit or asignificant portion of a reporting unit will be sold or otherwise disposed of;adverse results of testing for recoverability of a significant asset groupwithin a reporting unit; and a significant change to the operating plans forthe reporting unit. The impairment test for goodwill is a two-step process.Step one consists of a comparison of the fair value of a reporting unit to itscarrying amount, including the allocated goodwill. If the carrying amount ofthe reporting unit exceeds the fair value, step two requires the fair value ofthe reporting unit to be allocated to the underlying assets and liabilities ofthat reporting unit, resulting in an implied fair value of goodwill. If thecarrying amount of the reporting unit goodwill exceeds the implied fair valueof that goodwill, we record an impairment charge equal to the excess.

 

Eachindividual mineral property that is an operating mine is a reporting unit forthe purposes of allocating goodwill and testing for goodwill impairment.Goodwill arising on the acquisition of mineral properties is allocated to bothexisting and acquired reporting units, if the existing reporting unit isexpected to benefit from the synergies of the business combination. The amountof goodwill allocated to existing reporting units is based on the estimatedfair value of the combination synergies attributable to that reporting unit.Allocating goodwill to reporting units which are individual operating mines,which by their very nature have a limited useful life, will result in futuregoodwill impairment charges by the end of the mine life. The timing and amountof future goodwill impairment charges is difficult to determine and will bedependent on a multitude of factors that impact valuations of mineralproperties, including changes in observed market multiples for valuationpurposes, changes in geo-political risk and country specific discount rates,changes in market gold prices and total cash costs, success in finding newreserves, future exploration potential and future capital requirements.

 

Thereis no active market for our reporting units. Consequently, when assessing areporting unit for potential goodwill impairment, we use an income approach(being the present value of expected future net cash flows or net asset value (“NAV”)of the relevant

 

66

----

 

reporting unit) to determinethe fair value we could receive for the reporting unit in an arm’s lengthtransaction at the measurement date. Future cash flows are based on our bestestimates of projected future revenues, cash costs of production and capitalexpenditures contained in our long term Life of Mine (“LOM”) plans, which areupdated for each reporting unit in the fourth quarter of each fiscal year.Consequently, the process for determining the fair value of a reporting unit issubjective and requires management to make numerous estimates and assumptions,and therefore projected future results prepared using these estimates and assumptionsused in our goodwill impairment tests may differ in material respects fromactual future results.

 

OurLOM plans are based on detailed research, analysis and modeling to optimize theinternal rate of return generated from each reporting unit. As such, theseplans consider an optimal level of investment, overall production levels andsequence of extraction taking into account all relevant characteristics of theore body, including waste to ore ratios, ore grades, haul distances, chemicaland metallurgical properties impacting process recoveries and capacities ofavailable extraction, haulage and processing equipment. Therefore, the LOM planis the appropriate basis for forecasting production output in each future yearand the related production costs and capital expenditures.

 

Projectedfuture revenues reflect the forecasted future production levels at each of ourreporting units as detailed in our LOM plans. Included in these forecasts isthe production of mineral resources that do not currently qualify for inclusionin proven and probable ore reserves where there is a high degree of confidencein its economic extraction. This is consistent with the methodology we use tomeasure value beyond proven and probable reserves when allocating the purchase priceof a business combination to acquired mining assets, and is thereforeconsistent with the provisions of EITF 04-3, Mining Assets: Impairment andBusiness Combinations.

 

Projectedfuture revenues also reflect our estimated long term metals prices, which are determinedbased on current prices, an analysis of the expected total production costs ofthe producers and forward pricing curves of the particular metal and forecastsof expected long-term metals prices prepared by analysts. These estimates oftendiffer from current price levels, but our methodology is consistent with how a marketparticipant would assess future long term metals prices. In 2008, we have usedan estimated long-term future gold price of $850 per ounce (2007: $800 perounce), and an estimated long-term future copper price of $1.50 per pound for2009 (2007: $2.50 per pound) and $2.00 per pound thereafter.

 

Ourestimates of future cash costs of production and capital expenditures are basedon the LOM plans for each reporting unit. Costs incurred in currencies otherthan the US dollar are translated to US dollars using expected long-termexchange rates based on the relevant forward pricing curve. Oil prices are asignificant component, both direct and indirect, of our expected cash costs of production.We have used an estimated average oil price of $75 per barrel, which is basedon the spot price, forward pricing curve, and long term oil price forecastsprepared by analysts.

 

Thediscount rates used in determining the present value of a reporting unit arebased upon our real weighted average cost of capital, with appropriateadjustment for the remaining life of the mine and risks associated with therelevant cash flows based on the geographic location of the reporting unit.These risk adjustments were based on observed historical country risk premiumsand the average credit default swap spreads. In 2008, we used the followingreal discount rates for our gold mines: United States 2.68%–4.03% (2007:3.97%); Canada 3.29% (2007: 4.54%); Australia 3.66%–4.29% (2007: 4.98%);Argentina 13.74% (2007: 9.18%); Tanzania 8.49%–9.84% (2007: 7.01%); Papua NewGuinea 9.84% (2007: 7.86%); and Peru 6.33%–6.96% (2007: 5.4%). For our coppermines, we used the following real discount rates for 2008: Australia 6.95%(2007: 8.64%); and Chile 8.83% (2007: 8.36%). The increase in discount ratescompared to the prior year primarily reflects higher equity premiums over therisk-free borrowing rate, and an increase in country risk premiums due torising credit spreads and increased political risk in certain jurisdictions.

 

Forour gold reporting units, we apply a market multiple to the NAV computed usingthe present value of future cash flows approach in order to assess theirestimated fair value. Gold companies typically trade at a market capitalizationthat is based on a multiple of their underlying NAV. Consequently, a marketparticipant would generally apply a NAV multiple when estimating the fair valueof an operating gold mine.

 

67

----

 

Theselected multiple for a particular reporting unit considers its remainingeconomic life, the expected potential beyond proven and probable reserves andany other factors relevant to the valuation of a property. For reporting unitswith operating lives of five years or less, we selected multiples on the lowerend of the observed multiples range. Reporting units with operating livesgreater than five years were generally based on the median and/or averageobserved multiples. In 2008, we have used the following multiples in ourassessment of the fair value of our gold reporting units: North America 1.0–2.1(2007: 1.0–2.0); Australia 1.0–1.6 (2007: 1.5–2.1); South America 1.0–1.4(2007: 1.2–1.7); and Africa 1.0–1.6 (2007: 1.3–2.0).

 

Dueto the fact that goodwill is tested for impairment at a mine site level andoperating mines have a finite reserve life, goodwill impairment charges areinevitable. By the end of the life the likelihood of impairment chargesincreases as mines near the end of their reserve lives. In 2008, we recordedtotal goodwill impairment charges of $678 million, including: $272 million atour Kanowna gold mine in Australia primarily due to the overall decline in thetrading multiples on gold mining companies and higher discount factors; $216million at our North Mara gold mine in Africa due to the overall decline intrading multiples of gold mining companies and higher discount factors; $88million at our Barrick Energy business unit due to the significant decline inoil price since its acquisition date; $64 million at our Osborne copper mine inAustralia due to a decline in our copper price assumptions, which resulted in areduction in estimated production levels and remaining mine life; and $30million at our Henty gold mine in Australia primarily a result of its shortremaining mine life.

 

Individualmines have a finite reserve life. Consequently mines with a short remainingreserve life are generally at greater risk of incurring a goodwill impairmentcharge. Based on our most recent life of mine plans, Pierina, Tulawaka,Osborne, Henty, Golden Sunlight and Storm have remaining reserve lives of fouryears or less. The aggregate goodwill carrying amount for these mines at December 31,2008 was $70 million. The most significant factors impacting the outcome ofgoodwill impairment tests are market gold and copper prices; and discount ratesand market multiple assumptions used in the estimation of the value ofreporting units. An adverse change in any one or a combination of these factorscould lead to the recognition of further impairment charges in the futureperiods. The mines most likely to be affected by an adverse change in thesefactors include the Zaldívar copper mine due to the significant recent declinein copper prices and risk of a further decline in copper prices that couldcause us to lower our long-term copper price estimate; and the Porgera goldmine due to an increase in the discount rate largely due to sovereign creditspreads widening for Papua New Guinea and the recent decline in observed marketmultiples whereby a continuation of these two trends could potentially impactthe outcome of the goodwill impairment test in future periods.

 

**ProductionStage**

 

We assess each mineconstruction project to determine when a mine moves into production stage. Thecriteria used to assess the start date are determined based on the uniquenature of each mine construction project, such as the complexity of a plant orits location. We consider various relevant criteria to assess when the mine issubstantially complete and ready for its intended use and moved into productionstage. Some of the criteria considered would include, but are not limited to,the following: (1) the level of capital expenditures compared toconstruction cost estimates; (2) completion of a reasonable period oftesting of mine plant and equipment; (3) ability to produce minerals insaleable form (within specifications); and (4) ability to sustain ongoingproduction of minerals.

 

Whena mine construction project moves into the production stage, the capitalizationof certain mine construction costs ceases and costs are either capitalized toinventory or expensed, except for capitalizable costs related to property,plant and equipment additions or improvements, underground mine development orreserve development.

 

Pre-productionstripping costs are capitalized until an “other than de minimis” level ofmineral is produced, after which time such costs are either capitalized toinventory or expensed. We consider various relevant criteria to assess when an “otherthan de minimis” level of mineral is produced. Some of the criteria consideredwould include, but are not limited to, the following: (1) the amount ofounces mined versus total ounces in reserves; (2) the amount of ore tonsmined vs. total LOM expected ore tons mined; (3) the current strippingratio versus the LOM strip ratio; and (4) the ore grade versus the LOMgrade.

 

68

----

 

**Fair Valueof Asset Retirement Obligations (“AROs”)**

 

AROs arise from theacquisition, development, construction and normal operation of mining property,plant and equipment, due to government controls and regulations that protectthe environment and public safety on the closure and reclamation of miningproperties. We record the fair value of an ARO in our Consolidated FinancialStatements when it is incurred and capitalize this amount as an increase in thecarrying amount of the related asset. At operating mines, the increase in anARO is recorded as an adjustment to the corresponding asset carrying amount andresults in a prospective increase in amortization expense. At closed mines, anyadjustment to an ARO is charged directly to earnings.

 

Thefair values of AROs are measured by discounting the expected cash flows using adiscount factor that reflects the credit-adjusted risk-free rate of interest.We prepare estimates of the timing and amounts of expected cash flows when anARO is incurred, which are updated to reflect changes in facts and circumstances,or if we are required to submit updated mine closure plans to regulatoryauthorities. In the future, changes in regulations or laws or enforcement couldadversely affect our operations; and any instances of non-compliance with lawsor regulations that result in fines or injunctions or delays in projects, orany unforeseen environmental contamination at, or related to, our miningproperties, could result in us suffering significant costs. We mitigate theserisks through environmental and health and safety programs under which wemonitor compliance with laws and regulations and take steps to reduce the riskof environmental contamination occurring. We maintain insurance for someenvironmental risks, however, for some risks, coverage cannot be purchased at areasonable cost. Our coverage may not provide full recovery for all possiblecauses of loss. The principal factors that can cause expected cash flows tochange are: the construction of new processing facilities; changes in thequantities of material in reserves and a corresponding change in the life ofmine plan; changing ore characteristics that ultimately impact the environment;changes in water quality that impact the extent of water treatment required;and changes in laws and regulations governing the protection of theenvironment. In general, as the end of the mine life nears, the reliability ofexpected cash flows increases, but earlier in the mine life, the estimation ofan ARO is inherently more subjective. Significant judgments and estimates are madewhen estimating the fair value of AROs. Expected cash flows relating to AROscould occur over periods up to 40 years and the assessment of the extent ofenvironmental remediation work is highly subjective. Considering all of thesefactors that go into the determination of an ARO, the fair value of AROs canmaterially change over time.

 

Atour operating mines, we continue to record AROs based on disturbance of theenvironment over time. It is reasonably possible that circumstances could ariseduring or by the end of the mine life that will require material revisions toAROs. In particular, the extent of water treatment can have a material effecton the fair value of AROs, and the expected water quality at the end of themine life, which is the primary driver of the extent of water treatment, canchange significantly. We periodically prepare updated studies for our mines,following which it may be necessary to adjust the fair value of AROs. Theperiod of time over which we have assumed that water quality monitoring andtreatment will be required has a significant impact on AROs at closed mines.The amount of AROs recorded reflects the expected cost, taking into account theprobability of particular scenarios. The difference between the upper end ofthe range of these assumptions and the lower end of the range can besignificant, and consequently changes in these assumptions could have amaterial effect on the fair value of AROs and future earnings in a period ofchange.

 

Atone closed mine, the principal uncertainty that could impact the fair value ofthe ARO is the manner in which a tailings facility will need to be remediated.In measuring the ARO, we have concluded that there are two possible methodsthat could be used. We have recorded the ARO using the more costly method untilsuch time that the less costly method can be proven as technically feasible andapproved.

 

**AROs**

** **
| **($ millions)**      | ** ** | ** ** | ** ** | ** ** | ** ** |
|----------------------------|------------|------------|------------|------------|------------|
| **As at December 31** | ** ** | **2008**   | ** ** | **2007**   | ** ** |
| Operating mines            | ** ** | **$**      | **832**    |       | $          | 769 |   |
| Closed mines               | ** ** | **201**    |       | 197        |       |
| Development projects       | ** ** | **17**     |       | —     |       |
| Other                      | ** ** | **16**     |       | —     |       |
| **Total**                  | ** ** | **$**      | **1,066**  |       | $          | 966 |   |

 

69

----

 

**DeferredTax Assets and Liabilities**

 

*Measurementof Temporary Differences*

 

We are periodically requiredto estimate the tax basis of assets and liabilities. Where applicable tax lawsand regulations are either unclear or subject to varying interpretations, it ispossible that changes in these estimates could occur that materially affect theamounts of deferred income tax assets and liabilities recorded in our FinancialStatements. Changes in deferred tax assets and liabilities generally have adirect impact on earnings in the period of changes.

 

*ValuationAllowances*

 

Each period, we evaluate thelikelihood of whether some portion or all of each deferred tax asset will notbe realized. This evaluation is based on historic and future expected levels oftaxable income, the pattern and timing of reversals of taxable temporary timingdifferences that give rise to deferred tax liabilities, and tax planning activities.Levels of future taxable income are affected by, among other things, marketgold prices, and production costs, quantities of proven and probable gold andcopper reserves, interest rates and foreign currency exchange rates. If wedetermine that it is more likely than not (a likelihood of more than 50%) thatall or some portion of a deferred tax asset will not be realized, we record avaluation allowance against the amount we do not expect to realize. Changes invaluation allowances are recorded as a component of income tax expense orrecovery for each period. The most significant recent trend impacting expectedlevels of future taxable income and the amount of valuation allowances, hasbeen rising market gold prices. A continuation of a trend of higher gold pricescould lead to the release of some of the valuation allowances recorded, with acorresponding effect on earnings in the period of release. Conversely, adecline in market gold prices could lead to an increase in valuation allowancesand a corresponding increase in income tax expense.

 

In2008, we released $175 million of valuation allowances primarily becausesources of income became available that enabled tax losses and US AlternativeMinimum Tax (“AMT”) credits to be realized.

 

In2007, we released $156 million of end of year valuation allowances in Tanzaniadue to the estimated effect of higher market gold prices on the ability to utilizedeferred tax assets. We released other valuation allowances during 2007totaling $88 million, partly because sources of income became available thatenabled tax losses to be realized.

 

In2006, we released $25 million of valuation allowances in the United States dueto the estimated effect of higher market gold prices on the ability to utilizedeferred tax assets. Also in 2006, we released $9 million of valuationallowances in a Chilean entity due to the availability of income, and wereleased valuation allowances of $19 million in Canada, reflecting utilizationof capital losses.

 

**ValuationAllowances**

 
| **($ millions)**      | ** ** | ** ** | ** ** | ** ** | ** ** |
|----------------------------|------------|------------|------------|------------|------------|
| **As at December 31** | ** ** | **2008**   | ** ** | **2007**   | ** ** |
| United States              | ** ** | **$**      | **123**    |       | $          | 190 |   |
| Chile                      | ** ** | **23**     |       | 105        |       |
| Argentina                  | ** ** | **61**     |       | 26         |       |
| Canada                     | ** ** | **50**     |       | 55         |       |
| Tanzania                   | ** ** | **30**     |       | 30         |       |
| Other                      | ** ** | **31**     |       | 13         |       |
| **Total**                  | ** ** | **$**      | **318**    |       | $          | 419 |   |

 

**UnitedStates:**most of thevaluation allowances relate to AMT credits, which have an unlimitedcarry-forward period. Increasing levels of future taxable income due to highergold selling prices and other factors and circumstances may result in ourbecoming a regular taxpayer under the US regime, which may cause us to releasesome, or all, of the valuation allowance on the AMT credits.

 

**Chile,Argentina and Tanzania:**thevaluation allowances relate to the full amount of tax assets in subsidiariesthat do not have any present sources of gold production or taxable income. Inthe event that these subsidiaries have sources of taxable income in the future,we may release some or all of the valuation allowances.

 

**Canada:**substantially all of the valuation allowancesrelate to capital losses that can only be utilized if any capital gains arerealized.

 

70

----

 

**InternalControl over Financial Reporting and Disclosure Controls and Procedures**

 

Management is responsiblefor establishing and maintaining adequate internal control over financialreporting and other financial disclosure. Internal control over financialreporting is a process designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statementsfor external purposes in accordance with US GAAP.

 

TheCompany’s internal control over financial reporting includes those policies andprocedures that (i) pertain to the maintenance of records that, inreasonable detail, accurately and fairly reflect the transactions anddispositions of the assets of the Company; (ii) provide reasonableassurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with US GAAP, and that receipts andexpenditures of the Company are being made only in accordance withauthorizations of management and directors of the Company; and (iii) providereasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of the Company’s assets that could have amaterial effect on the Company’s Financial Statements.

 

Internalcontrol over other financial disclosure is a process designed to ensure thatother financial information included in this MD&A and Barrick’s AnnualReport, fairly present in all material respects the financial condition,results of operations and cash flows of the Company for the periods presentedin this report. The Company’s disclosure controls and procedures are designedto ensure that material information relating to the Company, including itsconsolidated subsidiaries, is made known to Management by others within thoseentities, particularly during the period in which this report is beingprepared.

 

Dueto its inherent limitations, internal control over financial reporting anddisclosure may not prevent or detect all misstatements. Also, projections ofany evaluation of effectiveness to future periods are subject to the risk thatcontrols may become inadequate because of changes in conditions, or that thedegree of compliance with the policies or procedures may change.

 

Themanagement of Barrick, with the participation of our chief executive andfinancial officers, have evaluated the effectiveness of the design andoperation of the internal controls over financial reporting and disclosurecontrols and procedures as of the end of the period covered by this report andhave concluded that they were effective at a reasonable assurance level.

 

Barrick’sannual management report on internal control over financial reporting and theintegrated audit report of Barrick’s auditors for the year ended December 31,2008 will be included in Barrick’s 2008 Annual Report and its 2008 Form 40-F/AnnualInformation Form on file with the SEC and Canadian provincial securitiesregulatory authorities.

 

**InternationalFinancial Reporting Standards (IFRS)**

** **

Barrick is a ‘domesticissuer’ under Canadian securities law and a ‘foreign private issuer’ under USSecurities and Exchange Commission (SEC) regulations. We file our financialstatements with both Canadian and US securities regulators in accordance withUS GAAP, as permitted under current regulations. Effective January 1,2011, all publicly accountable Canadian enterprises must apply IFRS. In December 2007,the SEC confirmed that foreign private issuers will be entitled to filefinancial statements in accordance with IFRS without reconciliation to US GAAP.As a result of these regulatory developments, we completed an initialassessment of the merits of a potential conversion to IFRS and, in thirdquarter 2008, we made a decision to convert to IFRS and begin filing financialstatements prepared under IFRS in our 2011 fiscal year consistent with otherCanadian issuers, primarily to improve the comparability of our financialresults with those of other gold mining companies.

 

Theconversion to IFRS from US GAAP is a significant undertaking, and as a result,we established a dedicated IFRS conversion team in early 2009 to lead thisprocess. The conversion to IFRS may have a material effect on our:

 

·                  reported financial position and results ofoperations;

·                  systems of internal controls and proceduresover financial reporting, including related business processes;

·                  information technology and data systems;

 

71

----

 

·                  disclosure controls and procedures;

·                  current financial reporting trainingcurriculum; and

·                  downstream business activities such as ourcorporate hedging programs, joint venture agreements and other contractualarrangements, debt covenants, compensation programs and tax planningarrangements.

 

The IFRS conversion team isresponsible for preparing our detailed IFRS conversion plan. We expect tocomplete the detailed IFRS conversion plan by the end of first quarter 2009.

 

Weare in the process of completing our detailed technical analysis of USGAAP-IFRS accounting differences, which we expect to complete by the end of thethird quarter 2009. Furthermore, IFRS accounting standards, and theinterpretation thereof, are constantly evolving and therefore are subject tochange through the end of 2011. Consequently, our IFRS conversion team willcontinuously monitor IFRS accounting developments and update our conversionplan and public disclosure as necessary.

 

**Non-GAAPFinancial Measures**

 

**AdjustedNet Income (Adjusted Net Income per Share)**

 

Adjusted net income is anon-GAAP financial measure which excludes the following from net income:

 

·                  impairment charges related to goodwill,property, plant and equipment, and investments;

·                  gains/losses on the disposition of long-livedassets;

·                  foreign currency translation gains/losses;and

·                  unrealized gains/losses on non-hedgederivative instruments.

 

Management uses this measureinternally to evaluate the underlying operating performance of the Company as awhole for the reporting periods presented, and to assist with the planning andforecasting of future operating results. We believe that adjusted net incomeallows investors and analysts to better evaluate the results of the underlyingbusiness of the Company.

 

Whilethe adjustments to net income in this measure include items that are recurring,management believes that adjusted net income is a useful measure of the Company’sperformance because impairment charges and gains/losses on asset dispositionsdo not reflect the underlying operating performance of our core mining businessand are not necessarily indicative of future operating results. Further,foreign currency translation gains/losses and unrealized gains/losses fromnon-hedge derivative contracts are not necessarily reflective of the underlyingoperating results for the reporting periods presented.

 

Asnoted, the Company uses this measure for its own internal purposes. Management’sinternal budgets and forecasts and public guidance do not reflect potentialimpairment charges, potential gains/losses on the disposition of assets,foreign currency translation gains/losses, or unrealized gains/losses onnon-hedge derivative contracts. Consequently, the presentation of adjusted netincome enables investors and analysts to better understand the underlyingoperating performance of our core mining business through the eyes ofManagement. Management periodically evaluates the components of adjusted netincome based on an internal assessment of performance measures that are usefulfor evaluating the operating performance of our business segments and a reviewof the non-GAAP measures used by mining industry analysts and other miningcompanies.

 

Adjustednet income is intended to provide additional information only and does not haveany standardized meaning prescribed by US GAAP and should not be considered inisolation or as a substitute for measures of performance prepared in accordancewith US GAAP. The measure is not necessarily indicative of operating profit orcash flow from operations as determined under US GAAP. Other companies maycalculate this measure differently. The following table reconciles thisnon-GAAP measure to the most directly comparable US GAAP measure.

 

72

----

 

**Reconciliationof Net Income to Adjusted Net Income**

 
| ** **                                                                               | ** ** | ** **                                                   | ** ** | ** **                      | ** ** | ** ** | ** ** | **For the three months** | ** ** |
|------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------|------------|---------------------------------|------------|------------|------------|-----------------------------------------|------------|
| ** **                                                                               | ** ** | **For the years ended December 31** | ** ** | **ended December 31** | ** ** |
| **($ millions, except per share amounts in dollars)** | ** ** | **2008**                                                     | ** ** | **2007**                        | ** ** | **2006**   | ** ** | **2008**                                | ** ** | **2007** | ** ** |
| Net income                                                                               | ** ** | **$**                                                        | **785**    | ** **                      | $          | 1,119      |       | $                                       | 1,506      |   | **$** | **(468** | **)** | $ | 537 |   |
| Impairment charges related to goodwill,  property, plant and equipment, and investments  |       | **899**                                                      | ** ** | 59                              |       | 17         |       | **773**                                 | ** ** | 54 |   |
| (Gains)/losses on the disposition of  long-lived assets                                  | ** ** | **(178**                                                     | **)**      | (59                             | )          | (301       | )          | **(123**                                | **)**      | 6 |   |
| Foreign currency translation (gains)/losses                                              | ** ** | **135**                                                      | ** ** | (73                             | )          | (7         | )          | **84**                                  | ** ** | (11 | ) |
| Unrealized (gains)/losses on non-hedge  derivative instruments                           | ** ** | **20**                                                       | ** ** | (10                             | )          | 15         |       | **11**                                  | ** ** | 11 |   |
| Adjusted net income                                                                      | ** ** | **$**                                                        | **1,661**  | ** **                      | $          | 1,036      |       | $                                       | 1,230      |   | **$** | **277** | ** ** | $ | 597 |   |
| Adjusted net income per share(1)                                                         | ** ** | **$**                                                        | **1.90**   | ** **                      | $          | 1.19       |       | $                                       | 1.46       | ** ** | **$** | **0.32** | ** ** | $ | 0.69 |   |
|                                                                                          |            |                                                              |            |                                 |            |            |            |                                         |            |  |  |  |  |  |  |  |  |  |

 

----

(1) Calculated using netincome and weighted average number of shares outstanding under the basic methodof earnings per share.

 

**Total CashCosts**

 

Total cash costs perounce/pound are non-GAAP financial measures. Total cash costs include all costsabsorbed into inventory, as well as royalties, by-product credits, andproduction taxes, and exclude inventory purchase accounting adjustments,unrealized gains/losses from non-hedge currency and commodity contracts, andamortization and accretion. Total cash costs also includes the gross margingenerated by our Barrick Energy business unit, which was acquired to provide along-term economic hedge of our exposure to oil prices, as a credit againstgold cash costs. The presentation of these statistics in this manner allows usto monitor and manage those factors that impact production costs on a monthlybasis. We calculate total cash costs based on our equity interest in productionfrom our mines. Total cash costs per ounce/pound are calculated by dividing theaggregate of these costs by gold ounces and copper pounds sold. Total cashcosts and total cash costs per ounce/pound are calculated on a consistent basisfor the periods presented.

 

Inour income statement, we present amortization separately from cost of sales.Some companies include amortization in cost of sales, which results in a differentmeasurement of cost of sales in the income statement. Under purchase accountingrules, we record the fair value of acquired work in progress and finished goodsinventories as at the date of acquisition. As the acquired inventory is sold,any purchase accounting adjustments, reflected in the carrying amount ofinventory at acquisition, impacts cost of sales. The method of valuing theseinventories is based on estimated selling prices less costs to complete and areasonable profit margin. Consequently, the fair values do not necessarilyreflect costs to produce consistent with ore mined and processed into gold andcopper after the acquisition. Many mining companies record the unrealizedgains/losses from non-hedge currency and commodity contracts in other income,and therefore these amounts are not reflected in the cost of sales/cash costsmeasures presented by these companies. Consequently, we believe that removingthese unrealized gains/losses provides investors and analysts with a measure ofour cash costs of production that is more comparable to the cash costs measurespresented by other mining companies. We have provided below reconciliations toillustrate the impact of excluding amortization and accretion, inventorypurchase accounting adjustments and unrealized gains/losses from non-hedgecurrency and commodity contracts from total cash costs per ounce/poundstatistics.

 

Webelieve that using an equity interest presentation is a fairer, more accurateway to measure economic performance than using a consolidated basis. For mineswhere we hold less than a 100% share in the production, we exclude the economicshare of gold production that flows to our partners who hold a non-controllinginterest. Consequently, for the Tulawaka mine, although we fully consolidatedthe results of operations from this mine in our consolidated financialstatements, our production and total cash cost statistics only reflect ourequity share of the production.

 

In2008, we have provided an alternative measure of total gold cash costs perounce which treats the gross margin from all non-gold sales, whether or notthese non-gold metals are produced in conjunction with gold, as a creditagainst the cost of producing gold. A number of other gold producers presenttotal

 

73

----

 

cash costs net of thecontribution from non-gold sales. We believe that including a measure of totalgold cash costs per ounce on this basis provides investors and analysts withinformation with which to compare our performance to other gold producers, andto assess the overall performance of our gold mining business. In addition,this measure provides information to enable investors and analysts tounderstand the importance of non-gold revenues to our cost structure.

 

Totalcash costs per ounce/pound statistics are intended to provide additionalinformation, do not have any standardized meaning prescribed by US GAAP andshould not be considered in isolation or as a substitute for measures ofperformance prepared in accordance with US GAAP. The measures are notnecessarily indicative of operating profit or cash flow from operations asdetermined under US GAAP. Other companies may calculate these measuresdifferently.

 

**Reconciliationof Cost of Sales to Total Cash Costs per Ounce/Pound**

 
| **($ millions, except per ounce/pound information in dollars)** | ** ** | **Gold**  | ** ** | **Copper** | ** ** |
|----------------------------------------------------------------------------------------------------|------------|-----------|------------|------------|------------|
| **For the years ended December 31**                                       | ** ** | **2008**  | ** ** | **2007**   | ** ** | **2006** | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
| Cost of sales                                                                                      | ** ** | **$**     | **3,426**  |       | $          | 2,805 |   | $ | 2,319 | ** ** | **$** | **436** |   | $ | 339 |   | $ | 391 |   |
| Cost of sales attributable to discontinued  operations                                             |       | —    |       | (9         | )          | 51 |   | — |   | — |   | — |   |
| Cost of sales attributable to  non-controlling interests(1)                                        | ** ** | **(14**   | **)**      | (15        | )          | (12 | ) | — | ** ** | — |   | — |   |
| Unrealized non-hedge gains/(losses) on  currency and commodity contracts                           |       | **(15**   | **)**      | (5         | )          | — |   | — | ** ** | — |   | — |   |
| Inventory purchase accounting adjustments                                                          | ** ** | **(16**   | **)**      | —     |       | (11 | ) | — |   | (9 | ) | (97 | ) |
| Impact of Barrick Energy                                                                           | ** ** | **(14**   | **)**      | —     |       | — |   | — | ** ** | — |   | — |   |
| Total cash costs                                                                                   | ** ** | **3,367** | ** ** | 2,776      |       | 2,347 | ** ** | **436** | ** ** | 330 |   | 294 |   |
| Ounces/pounds sold – consolidated basis  (000s)                                               | ** ** | **7,658** | ** ** | 8,108      |       | 8,566 | ** ** | **367** | ** ** | 401 |   | 376 |   |
| Ounces/pounds sold – non-controlling  interest (000s)                                         | ** ** | **(63**   | **)**      | (53        | )          | (176 | ) | — | ** ** | — |   | — |   |
| Ounces/pounds sold – equity basis (000s)                                                      | ** ** | **7,595** | ** ** | 8,055      |       | 8,390 | ** ** | **367** | ** ** | 401 |   | 376 |   |
| Total cash costs per ounce/per pound                                                               | ** ** | **$**     | **443**    | ** ** | $          | 345 |   | $ | 280 | ** ** | **$** | **1.19** |   | $ | 0.82 |   | $ | 0.78 |   |

 

----

(1)Relates to a 70% interest in Tulawaka and a 50% interest in South Deep prior to2007.

 

**Total GoldCash Costs per Ounce – Full Credit for Non-Gold Sales**

 
| ** **                                                                                  | ** ** | ** **                                                   | ** ** | ** **                      | ** ** | ** ** | ** ** | **For the three months** | ** ** |
|---------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------|------------|---------------------------------|------------|------------|------------|-----------------------------------------|------------|
| ** **                                                                                  | ** ** | **For the years ended December 31** | ** ** | **ended December 31** | ** ** |
| **($ millions, except per ounce/pound data in dollars)** | ** ** | **2008**                                                     | ** ** | **2007**                        | ** ** | **2006**   | ** ** | **2008**                                | ** ** | **2007** | ** ** |
| Ounces gold sold – equity basis (000s)                                                 | ** ** | **7,595**                                                    |       | 8,055                           |       | 8,390      | ** ** | **2,190**                               |       | 2,042 |   |
| Total cash costs per – ounce equity basis                                              | ** ** | **$**                                                        | **443**    |                            | $          | 345        |       | $                                       | 280        | ** ** | **$** | **471** |   | $ | 369 |   |
| Revenues from copper sales                                                                  | ** ** | **$**                                                        | **1,228**  |                            | $          | 1,305      |       | $                                       | 1,137      | ** ** | **$** | **321** |   | $ | 273 |   |
| Unrealized non-hedge gains/(losses) from  copper contracts                                  | ** ** | **14**                                                       |       | (16                             | )          | 13         | ** ** | **(3**                                  | **)**      | 16 |   |
| Net revenues from copper excluding  unrealized non-hedge gains/losses from copper contracts |       | **1,242**                                                    |       | 1,289                           |       | 1,150      |       | **318**                                 | ** ** | 289 |   |
| Copper cost of sales per consolidated  statement of income                                  | ** ** | **436**                                                      |       | 339                             |       | 391        | ** ** | **122**                                 | ** ** | 76 |   |
| Inventory purchase accounting adjustments  included in cost of sales                        |       | —                                                       |       | (9                              | )          | (97        | )          | —                                  | ** ** | — |   |
| Cost of sales – copper                                                                 | ** ** | **$**                                                        | **436**    |                            | $          | 348        |       | $                                       | 488        | ** ** | **$** | **122** | ** ** | $ | 76 |   |
| Gross margin – copper                                                                  | ** ** | **806**                                                      |       | 941                             |       | 662        | ** ** | **196**                                 | ** ** | 213 |   |
| Copper gross margin per ounce                                                               | ** ** | **106**                                                      |       | 117                             |       | 79         | ** ** | **89**                                  |       | 104 |   |
| Total gold cash costs per ounce – full  credit basis for non-gold sales                |       | **$**                                                        | **337**    |                            | $          | 228        |       | $                                       | 201        |   | **$** | **382** |   | $ | 265 |   |

 

74

----

 

**EBITDA**

 

EBITDAis a non-GAAP financial measure, which excludes the following from net income:

·      incometax expense;

·      interest expense;

·      interest income; and

·      depreciation and amortization.

 

Managementbelieves that EBITDA is a valuable indicator of the Company’s ability togenerate liquidity by producing operating cash flow to: fund working capital needs,service debt obligations, and fund capital expenditures. Management uses EBITDAfor this purpose. EBITDA is also frequently used by investors and analysts forvaluation purposes whereby EBITDA is multiplied by a factor or “EBITDA multiple”that is based on observed or inferred relationship between EBITDA and marketvalues to determine the approximate total enterprise value of a company.

 

EBITDA is intended to provide additional information to investors andanalysts, does not have any standardized meaning prescribed by US GAAP andshould not be considered in isolation or as a substitute for measures ofperformance prepared in accordance with US GAAP.EBITDA excludes the impact ofcash costs of financing activities and taxes, and the effects of changes inoperating working capital balances, and therefore is not necessarily indicativeof operating profit or cash flow from operations as determined under US GAAP. Othercompanies may calculate EBITDA differently.

 

The following table provides a reconciliation of EBITDA to net income.

 

**Reconciliationof Net Income to EBITDA**

 
| ** **                                                                               | ** ** | ** **                                                   | ** ** | ** **                      | ** ** | ** ** | ** ** | **For the three months** | ** ** |
|------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------|------------|---------------------------------|------------|------------|------------|-----------------------------------------|------------|
| ** **                                                                               | ** ** | **For the years ended December 31** | ** ** | **ended December 31** | ** ** |
| **($ millions, except per share amounts in dollars)** | ** ** | **2008**                                                     | ** ** | **2007**                        | ** ** | **2006**   | ** ** | **2008**                                | ** ** | **2007** | ** ** |
| Net income                                                                               | ** ** | **$**                                                        | **785**    |                            | $          | 1,119      |       | $                                       | 1,506      | ** ** | **$** | **(468** | **)** | $ | 537 |   |
| Income tax expense                                                                       | ** ** | **590**                                                      | ** ** | 341                             |       | 348        | ** ** | **164**                                 | ** ** | 15 |   |
| Interest expense                                                                         | ** ** | **21**                                                       | ** ** | 113                             |       | 126        |       | —                                  | ** ** | 22 |   |
| Interest income                                                                          | ** ** | **(39**                                                      | **)**      | (141                            | )          | (110       | )          | **(5**                                  | **)**      | (34 | ) |
| Depreciation and amortization                                                            | ** ** | **990**                                                      | ** ** | 1,004                           |       | 735        |       | **264**                                 | ** ** | 253 |   |
| EBITDA                                                                                   | ** ** | **$**                                                        | **2,347**  |                            | $          | 2,436      |       | $                                       | 2,605      | ** ** | **$** | **(45** | **)** | $ | 793 |   |

 

**RealizedPrices**

 

Realized price is a non-GAAPfinancial measure which excludes from sales:

 

·      unrealizedgains and losses on non-hedge derivative contracts, and

·      unrealizedmark-to-market gains and losses on outstanding receivables from copper and goldsales contracts.

 

This measure is intended toenable management to better understand the price realized in each reportingperiod for gold and copper sales because unrealized mark-to-market value ofnon-hedge gold and copper derivatives and unrealized mark-to-market gains andlosses on outstanding receivables from copper and gold sales contracts aresubject to change each period due to changes in market factors such as spot andforward gold and copper prices such that prices ultimately realized may differfrom those recorded. The exclusion of such unrealized mark-to-market gains andlosses from the presentation of this performance measure enables investors tounderstand performance based on the realized proceeds of selling gold andcopper production. The gains and losses on non-hedge derivatives and receivablebalances relate to instruments/balances that mature in future periods, at whichtime the gains and losses will become realized. The amounts of these gains andlosses reflect fair values based on market valuation assumptions at the end ofeach period and do not necessarily represent the amounts that will becomerealized on maturity. For those reasons, Management believes that this measureprovides a more accurate reflection of the Company’s past performance and is abetter indicator of its expected performance in future periods.

 

Therealized price measure is intended to provide additional information, and doesnot have any standardized meaning prescribed by US GAAP and should not beconsidered in isolation or as a substitute for measures of performance preparedin accordance with US GAAP. The measure is not necessarily indicative of salesas determined under US GAAP. Other companies may calculate this measuredifferently. The following table reconciles realized prices to the mostdirectly comparable US GAAP measure.

 

75

----

 

**Reconciliationof Sales to Realized Price per Ounce/per Pound**

 
| **($ millions, except per ounce/pound data in dollars)** | ** ** | **Gold**  | ** ** | **Copper** | ** ** |
|---------------------------------------------------------------------------------------------|------------|-----------|------------|------------|------------|
| **For the years ended December 31**                                | ** ** | **2008**  | ** ** | **2007**   | ** ** | **2006** | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
| Sales                                                                                       | ** ** | **$**     | **6,656**  |       | $          | 5,027 |   | $ | 4,493 | ** ** | **$** | **1,228** |   | $ | 1,305 |   | $ | 1,137 |   |
| Sales attributable to non-controlling  interests                                            | ** ** | **(56**   | **)**      | (38        | )          | 52 |   | — |   | — |   | — |   |
| Unrealized non-hedge gold/copper derivative  (gains) losses                                 | ** ** | **2**     | ** ** | (2         | )          | 7 | ** ** | **(23** | **)** | (26 | ) | 13 |   |
| Unrealized mark-to-market provisional price  adjustments                                    | ** ** | **(1**    | **)**      | (2         | )          | 1 | ** ** | **38** | ** ** | 10 |   | — |   |
| Sales – as adjusted                                                                    | ** ** | **6,601** | ** ** | 4,985      |       | 4,553 | ** ** | **1,243** | ** ** | 1,289 |   | 1,150 |   |
| Ounces/pounds sold (000s)                                                                   | ** ** | **7,595** | ** ** | 8,055      |       | 8,390 | ** ** | **367** | ** ** | 401 |   | 376 |   |
| Realized gold/copper price per ounce/pound                                                  | ** ** | **$**     | **870**    | ** ** | $          | 619 |   | $ | 543 | ** ** | **$** | **3.39** | ** ** | $ | 3.22 |   | $ | 3.06 |   |

 

**Cash Marginper Ounce**

 

Management uses a non-GAAPfinancial measure cash margin per ounce that represents realized price perounce less total cash costs per ounce. This measure is used by management toanalyze trends in our profitability on a unit basis and to assess the cashgenerating capabilities of our operating mines in each reporting period forgold and copper sales.

 

Managementbelieves that this measure reflects the net contribution from our gold salesand is an important indicator of expected performance in future periods. Ourcash margin per ounce is intended to provide additional information, does nothave any standardized meaning prescribed by US GAAP and should not beconsidered in isolation or as a substitute for measures of performance preparedin accordance with US GAAP. This measure is not necessarily indicative ofoperating profit or cash flow from operations as determined under US GAAP.Other companies may calculate cash margin per ounce differently. The followingtable derives this non-GAAP measure from previously defined non-GAAP measuresof realized gold/copper price per ounce and total cash costs per ounce.

 

**Reconciliationof Cash Margin per Ounce**

 
| **(per ounce data in dollars)**          | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|--------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| **For the years ended December 31** | ** ** | **2008**   | ** ** | **2007**   | ** ** | **2006**   | ** ** |
| Realized gold price per ounce                                | ** ** | **$**      | **870**    |       | $          | 619        |       | $ | 543 |   |
| Total cash costs per ounce                                   | ** ** | **443**    |       | 345        |       | 280        |       |
| Cash margin per ounce                                        | ** ** | **$**      | **427**    |       | $          | 274        |       | $ | 263 |   |

 

76

----

 

**Glossary ofTechnical Terms**

 

**AUTOCLAVE:**Oxidation process in which high temperaturesand pressures are applied to convert refractory sulfide mineralization intoamenable oxide ore.

 

**BACKFILL:**Primarily waste sand or rock used to supportthe roof or walls after removal of ore from a stope.

 

**BY-PRODUCT:**A secondary metal or mineral product recoveredin the milling process such as copper and silver.

 

**CONCENTRATE:**A very fine,powder-like product containing the valuable ore mineral from which most of thewaste mineral has been eliminated.

 

**CONTAINEDOUNCES:**Representsounces in the ground before reduction of ounces not able to be recovered by theapplicable metallurgical process.

 

**CONTANGO:**The positive difference between the spotmarket gold price and the forward market gold price. It is often expressed asan interest rate quoted with reference to the difference between inter-bankdeposit rates and gold lease rates.

 

**DEVELOPMENT:**Work carried out forthe purpose of opening up a mineral deposit. In an underground mine thisincludes shaft sinking, crosscutting, drifting and raising. In an open pitmine, development includes the removal of overburden.

 

**DILUTION:**The effect of waste or low-grade ore which isunavoidably included in the mined ore, lowering the recovered grade.

 

**DORÉ:**Unrefined gold and silver bullion bars usuallyconsisting of approximately 90 percent precious metals that will be furtherrefined to almost pure metal.

 

**DRILLING:**

 

*Core:*drilling with a hollow bit with a diamondcutting rim to produce a cylindrical core that is used for geological study andassays. Used in mineral exploration.

 

*In-fill:*any method of drilling intervals betweenexisting holes, used to provide greater geological detail and to help establishreserve estimates.

 

**EXPLORATION:**Prospecting, sampling,mapping, diamond-drilling and other work involved in searching for ore.

 

**GRADE:**The amount of metal in each ton of ore,expressed as troy ounces per ton or grams per tonne for precious metals and asa percentage for most other metals.

 

*Cut-offgrade:*the minimummetal grade at which an orebody can be economically mined (used in thecalculation of ore reserves).

 

*Mill-headgrade:*metal contentof mined ore going into a mill for processing.

 

*Recoveredgrade:*actual metalcontent of ore determined after processing.

 

*Reservegrade:*estimated metalcontent of an orebody, based on reserve calculations.

 

**HEAPLEACHING:**A processwhereby gold is extracted by “heaping” broken ore on sloping impermeable padsand continually applying to the heaps a weak cyanide solution which dissolvesthe contained gold. The gold-laden solution is then collected for goldrecovery.

 

**HEAP LEACHPAD:**A largeimpermeable foundation or pad used as a base for ore during heap leaching.

 

**MILL****:**A processing facility where ore is finelyground and thereafter undergoes physical or chemical treatment to extract thevaluable metals.

 

**MINERALRESERVE:**See pages 141to 148 — “Summary Gold Mineral Reserves and Mineral Resources.”

 

**MINERALRESOURCE:**See pages 141to 148 — “Summary Gold Mineral Reserves and Mineral Resources.”

 

**MININGCLAIM:**That portion ofapplicable mineral lands that a party has staked or marked out in accordancewith applicable mining laws to acquire the right to explore for and exploit theminerals under the surface.

 

**MINING RATE:**Tons of ore mined perday or even specified time period.

 

**OPEN PIT:**A mine where the minerals are mined entirelyfrom the surface.

 

**ORE:**Rock, generally containing metallic ornon-metallic minerals, which can be mined and processed at a profit.

 

**ORE BODY:**A sufficiently large amount of ore that can bemined economically.

 

**OUNCES:**Troy ounces of a fineness of 999.9 parts per1,000 parts.

 

**RECLAMATION:**The process by whichlands disturbed as a result of mining activity are modified to supportbeneficial land use. Reclamation activity may include the removal of buildings,equipment, machinery and other physical remnants of mining, closure of tailingsstorage facilities, leach pads and other mine features, and contouring,covering and re-vegetation of waste rock and other disturbed areas.

 

**RECOVERYRATE:**A term used inprocess metallurgy to indicate the proportion of valuable material physicallyrecovered in the processing of ore. It is generally stated as a percentage ofthe material recovered compared to the total material originally present.

 

**REFINING:**The final stage of metal production in whichimpurities are removed from the molten metal.

 

**STRIPPING:**Removal of overburden or waste rock overlyingan ore body in preparation for mining by open pit methods. Expressed as thetotal number of tons mined or to be mined for each ounce of gold.

 

**TAILINGS:**The material that remains after alleconomically and technically recoverable precious metals have been removed fromthe ore during processing.

 

77

----