Gold mining company will help Yokohama with OTR factory expansion

ERJ staff report (DS)

Toronto, Ontario -- A mining company and Yokohama have struck a long-term, mutually beneficial deal. Barrick Gold Corp, of Ontario and Yokohama Rubber Co. Ltd. of Japan have signed a 10-year agreement which guarantees supply of mining tyres in exchange for a loan on favourable terms.

Barrick said, "Under the agreement, Barrick will purchase approximately 1,300 off-the-road (OTR) tyres 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 5000 million yen (Euro 32 million) expansion includes a new building, production line, and related equipment, and will be primarily funded by a US$35 million (Euro 23.6 million) loan from Barrick. Start up is scheduled for late in the fourth quarter of 2008. "

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

"This is an innovative response to the worldwide tyre 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 tyres for our operations and our new projects. In our assessment, Yokohama produces the finest cross-ply OTR tyres on the market, so we are proud to partner with them as a key tyre supplier."

The contract covers five sizes of cross-ply, giant OTR tyres, 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 optimised for the operation. Barrick mines will receive delivery directly from the Onomichi plant and direct-from-manufacturer pricing for the next decade.

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

The company continued, "Prices range from about US$200 each for a pickup truck tyre to US$60 000 for the largest loader tyre. On the open market or in internet auctions, giant tyres have sold for as much as US$300 000.

Tyres are a critical part component for mining and one of the largest single procurement expenses. For all tyre categories, Barrick spent a total of about $80 million in 2006. Barrick currently buys about 3000 giant tyres (45 inches and larger) a year, and that number is expected to increase to 4500 by 2012.

Barrick said although radial tyres are in very short supply, cross-ply tyres can still be found at reasonable prices. The company said, "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."

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Press release from Barrick