Barrick Gold Corporation

Barrick Gold Corporation

January 30, 2008 10:48 ET

Barrick Signs Innovative 10-year Agreement with Yokohama to Secure Tire Supply

TORONTO, ONTARIO--(Marketwire - Jan. 30, 2008) - Barrick Gold Corporation (TSX:ABX)(NYSE:ABX) announced today a 10-year agreement with Yokohama Rubber Co. Ltd. of Japan to secure the supply of potentially more than $200 million in tires.

Barrick President and CEO Greg Wilkins met with Yokohama President and CEO Tadanobu Nagumo for an official signing ceremony.

Under the agreement, Barrick will purchase approximately 1,300 off-the-road (OTR) tires a year, beginning in 2009. To meet this demand, Yokohama will embark on the second major expansion in two years of the Onomichi plant located in Hiroshima Prefecture, Japan. The US$50 million (5 billion yen) expansion includes a new building, production line, and related equipment, and will be primarily funded by a $35 million loan from Barrick. Start up is scheduled for late in the fourth quarter of 2008. This expansion supports Yokohama's strategy to grow its share of the OTR market, and demonstrates Barrick's partnership approach with suppliers.

"This is an innovative response to the worldwide tire shortage now facing the mining industry," said Wilkins. "We are providing partial financing for our supplier's plant expansion to secure a supply of high quality tires for our operations and our new projects. In our assessment, Yokohama produces the finest bias-ply OTR tires on the market, so we are proud to partner with them as a key tire supplier."

The contract covers five sizes of bias-ply, giant OTR tires, including loader and haul truck sizes up to the 40.00-57 profile. In addition, Yokohama will provide technical assistance with each Barrick site to ensure that the proper compound, tread pattern, and other characteristics are optimized for the operation. Barrick mines will receive delivery directly from the Onomichi plant and direct-from-manufacturer pricing for the next decade.

A boom in the mining and construction industries has created high demand and tire shortages as well as upward pressure on prices as tire manufacturers push to meet orders. At mine sites, Barrick has implemented a host of tire-saving strategies, including enhanced maintenance and repair and sharing of inventory between sites.

Headquartered in Tokyo, Japan, Yokohama Rubber Co., Ltd. is a global producer and distributor of premium tires. The Onomichi plant is specialized in the manufacture of OTR tires, and recently completed an expansion that was officially opened in October 2007.

Barrick Gold Corporation is the world's preeminent gold mining company with 27 operating mines and 20,000 employees worldwide. Headquartered in Toronto, Canada, Barrick's vision is to be the world's best gold company by finding, acquiring, developing and producing quality reserves in a safe, profitable and socially responsible manner. Founded in 1983, Barrick celebrates its 25th anniversary in 2008. Barrick shares are traded on the Toronto and New York stock exchanges. For more information, visit

Innovative Tire Strategies Control Costs

Barrick's systematic supply chain management approach and best practice maintenance strategies help ensure tire supply and extend tire life

Today's Tire Challenge

- Expansion in the mining and construction industries has created high worldwide demand for tires, resulting in rising prices and tire shortages. Since 2004, tire demand has more than doubled without a corresponding increase in production. It is an issue for the industry that hurts production if, for example, a $3 million haul truck cannot operate for lack of tires.

- With a limited number of tire producers, high barriers to expansion in production of radial tires, and manufacturers focused on phasing out bias ply tires, demand quickly outpaced supply for both radial and bias ply tires. Supply will continue to be tight with major manufacturers projecting shortages until at least 2011.

- In response, demand for used or repaired tires grew and supply has now dried up. Depending on the initial tire quality and the quality of repairs, used tires do not last long (about 5-7 used tires equal the life of a new one). Some companies are now forced to buy tires at auction or through used tire brokers, or must purchase lower grade products.

- Prices range from about US$200 each for a pickup truck tire to $60,000 for the largest loader tire. On the open market or in internet auctions, giant tires have sold for as much as $300,000.

- Tires are a critical part component for mining and one of the largest single procurement expenses. For all tire categories, Barrick spent a total of about $80 million in 2006. Barrick currently buys about 3,000 giant tires (45 inches and larger) a year, and that number is expected to increase to 4,500 by 2012.

- Barrick has implemented a mix of innovative strategies to help ensure a short-term supply of tires and a sufficient longer-term supply of high quality tires for its operations and project pipeline development needs. Strategies include a systematic Supply Chain Management process focused on multiple sourcing from only quality suppliers, using long term contracts and vertical integration initiatives to secure a supply of tires. A global approach to tire management and continuous improvement at Barrick sites has implemented best practices that have significantly extended tire life and helped manage tire costs.

Barrick Strategies to Help Ensure Supply

- Using a multiple sourcing strategy, Barrick has negotiated long-term contracts with major high quality manufacturers of OTR tires, and negotiations are underway with others.

- Barrick has now added Yokohama as a key tire supplier. Barrick has entered into an innovative arrangement to partially fund an expansion of Yokohama's Onomichi plant in Japan to secure supply and direct-from-manufacturer pricing. Barrick will purchase up to 1,300 off-the-road (OTR) tires a year from Yokohama, beginning in 2009 and continuing for 10 years. The contract covers five sizes of bias-ply, giant off-the-road (OTR) tires, including loader and haul truck sizes up to the 40.00-57 profile. In addition, Yokohama will provide technical assistance with each Barrick site to ensure that the proper compound, tread pattern, and other characteristics are optimized for the operation. Barrick mines will receive delivery directly from the Onomichi plant. In testing Yokohama bias ply tires, Barrick has found the quality excellent, with safety, wear and performance standards similar to radial tires.

- While radial tires are in high demand, Barrick has rediscovered applications of bias ply tires. Testing conducted by Barrick tire teams in Peru in early 2005 determined that 51" and 57" bias ply tires could be successfully used for haul trucks at appropriate speeds and loads. These findings were shared with other Barrick sites, which replicated local testing later that year. Further tests at Goldstrike with Yokohama bias ply on the front and rear positions of haul trucks in early 2007 at full rated load and speed concluded the Yokohama bias ply tires performed as well as radials on 190-ton trucks. Appropriate use of high quality bias ply tires balances the demand for radials.

- Barrick has a Global Tire Strategy Team with representatives from each business region. This group assesses potential tire suppliers and reviews supplier performance. Barrick tested products from numerous suppliers worldwide and purchases only from those that meet our high safety, wear and performance standards.

- Barrick sites share tire inventory as required, shifting tires to locations in need; for example, radials from South America have been sent to Tanzania, and haul truck tires have been transferred from the Porgera site in Papua New Guinea to Cowal in New South Wales, Australia.

Barrick Strategies for Extending Tire Life

Reflecting the company's core value of continuous improvement, Barrick has implemented innovative tire maintenance and management strategies to extend tire life and control costs. Here are some examples and success stories:

- Engineering and planning groups now consider tire life in creating pit design.

- Smooth, level haul roads prolong tire and vehicle life. Existing mines have redesigned haul routes and dumping procedures to maximize tire life. For example, grades that exceed 10% can reduce tire performance by as much as 25%.

- Barrick now provides on-going training for drivers/operators in proper tire care. The operators take ownership and play a key role in protecting their equipment and tires. They treat every tire as if it is the last one!

- Rock cuts are one of the most common causes of tire failure. Operators fill trucks to target payload to optimize tire wear and eliminate spillage, and weigh studies confirm these limits are being observed. Roadways are inspected regularly and kept clear of rocks or debris that could damage tires. Potholes, washboard and uneven sections in roadways are corrected promptly to avoid excess tire wear. At the Granny Smith mine in Australia, for example, roadway initiatives saved 27 haul truck tires over a period of just seven months.

- A study conducted at the Cortez mine in Nevada found that reducing speed of loaded trucks to 15 miles an hour reduced flats and extended tire life by 20 per cent. This reduced maintenance costs and downtime, and improved overall safety. Production was actually enhanced because of increased availability of trucks and equipment.

- Sites have cross-functional continuous improvement teams that implement best practices in tire maintenance:

-- Regular meetings with tire supplier representatives

-- Tire awareness among all staff

-- Maintain 2-3 months of stock

-- Daily checks of air pressure, temperature, visual inspection, load centering and suspension elevation

-- Speeds within the tire and equipment rated limits

-- Loads within tire and equipment rated limits

-- Tire rotation and tire matching policy to maximize performance

-- Haul roads, curves and grades set to maximize tire life

-- Weight studies to confirm loads

-- Site studies to confirm speeds

-- Tire repair to get every hour out of every tire

-- Breakdown analysis with suppliers and repair staff

-- Proper tire storage and handling -- Large mining tires should be stored standing; stacking them promotes deformation and makes mounting such tires next to impossible. Large-tire handling also requires specialized equipment that grasps the tire by the treads which reduces the possibility of damaging the tire's beads, which are the final air seal between tire and rim.

-- Breakdown analysis together with suppliers and repairmen

- Sites now monitor tires closely, measuring tire pressure every day and reviewing tread wear. They post monthly performance data and share that information with the Global Tire Strategy Team. Barrick will soon implement a company-wide database that tracks tires, their performance and maintenance. This tool will help with asset management, tire needs forecasting and budgeting. The first installation will be at Ruby Hill in Nevada in early 2008, with other locations to follow.

- Average tire life depends on local conditions (rainfall, hardness of ore, and other factors wear tires down), but tire-saving strategies can have a significant impact. Initiatives implemented at the Zaldivar mine in Chile, for example, improved overall average tire life by 20% with average tire life reaching 6,018 hours. For tires discarded only when totally worn, performance improved from a projected 7,500 hours to an average of 8,019 hours.

- The Goldstrike mine in Nevada has had a tire-saving program since 2002. As a result of these various strategies, average tire life improved from 2,654 hours in 2002 to 4,569 by 2005, resulting in estimated savings of $144,000 a month. Current average tire life is about 4,600 hours.

- Tire repairs are cost effective if well managed and expertly done. Large sites like Cortez and Goldstrike in Nevada and Porgera in Papua New Guinea have on-site tire maintenance and repair facilities. They inspect tires daily and repair any rock cuts or tire damage promptly to extend tire life. This capability also enables the mines to be very selective if purchasing used tires. Tire repairs can and do save money. Cortez saved more than 31,677 hours on repaired tires amounting to savings of more than $180,000 in 2007 alone. At the Porgera mine in Papua New Guinea, special training for the site tire shop technicians doubled throughput to clear backlog of tire repairs.

- With giant tires, small changes can bring big savings; for example, at the Hemlo mine in northern Ontario, chains installed on two loaders extended tire life, reduced downtime, and decreased tire storage costs, generating $108,500 in annual savings. Chain use is now widespread on loaders at many Barrick sites worldwide, wherever conditions allow.


Early on, Barrick identified tires as a short and long term supply issue that could affect ability to meet production targets. The company took numerous steps to address the issue:

- Formed a Global Tire Strategy Team with involvement from all business regions; reviewed suppliers against high quality standard

- Worked with existing suppliers to optimize availability through long term contracts

- Formed continuous improvement teams at sites to extend tire life through best practice maintenance and repair

- Regular communication among site teams and sharing of inventory

- Established appropriate applications for bias ply tires as an alternative to radials

- Implemented vertical integration strategy with Yokohama by funding a dedicated production line for giant haul truck tires

As a result, Barrick is in a position to meet its tire requirements for the foreseeable future, which will help ensure that production is not interrupted for lack of tires.

Contact Information

  • Barrick Gold Corporation
    INVESTOR CONTACT: Deni Nicoski
    Vice President, Investor Relations
    (416) 307-7410
    Barrick Gold Corporation
    MEDIA CONTACT: Vincent Borg
    Senior Vice President, Corporate Communications
    (416) 307-7477