Barrick buckling down for ‘grunt’ work ahead, CEO Bristow says
TORONTO — Since Mark Bristow took the helm of Barrick Gold Corp. in a transformational merger one year ago, the company has enjoyed a 42 per cent surge in its share price amid rising bullion prices and a streamlined portfolio and corporate structure that has won over many investors.
Still, in an interview at his office in a downtown Toronto high rise on Wednesday, Bristow suggested the coming year would reveal new, more difficult challenges.
“I don’t want to sound flippant,” he told the Financial Post, “but these last 12 months we set out to do something and we did it, but there was a lot of low-hanging fruit. Now it’s the grunt to get it to the next level.”
Exactly what lies ahead for the miner is a topic of great speculation, not least because Bristow has publicly mused about adding more copper assets to the company’s portfolio, singling out Freeport-McMoran’s Grasberg mine in Indonesia as an asset he’d like to acquire. But he brushed aside the comments, saying such a deal would take months if not years of legwork and that it was just an idea at this stage.
“We’re running out of pure gold discoveries,” he said, explaining that copper-gold deposits of sufficient size are being discovered more often nowadays.
That’s what spurred his public comments about Grasberg, he said, and there are few players with the “firepower” to acquire it. He noted he has also mused about buying gold mines.
In any case, next week, the company’s top 30 executives will convene in London for a planning session. Bristow said it will involve enumerating exactly what the executives need to accomplish in the year ahead, rather than any change in direction for the miner.
The company is still focused on building a portfolio of Tier 1 gold mines, defined as mines that can produce 500,000 ounces in the lower half of the cost curve and operate at least 10 years. It wants to sell certain mines that can’t meet those hurdles, but Bristow said there are a lot of assets for sale at the moment, which could delay the timeline for any sale.
After producing 5.4 million ounces of gold in 2019 at an all-in sustaining cost of US$923 per ounce, Barrick is predicting it will produce slightly less next year — guiding for 4.8 million to 5.2 million ounces at an all-in sustaining cost of US$920 to US$970 per ounce.
The company plans to release its 10-year production plan in March.
On Wednesday, the company released its fourth-quarter results and increased its annual dividend by 40 per cent to 28 cents while also increasing its proven and probable reserves of gold by 14.5 per cent to 71 million ounces.
It also increased its free cash flow to US$1.1 billion — more than double its US$365 million in 2018. In September 2018, it merged with Bristow’s former company, Randgold Resources Inc., in a $6 billion deal that has helped propel the company’s stock.
Fahad Tariq, an analyst at Credit Suisse, wrote Wednesday that he expected only slight positive market reaction to the fourth-quarter results, in part because the gains were offset by “slightly lighter 2020 production guidance.”
Indeed, on Wednesday, Barrick’s stock closed down 0.57 per cent to $24.39.
Bristow, however, has emphasized profits are more important to him than the number of ounces, and has set a goal of creating “the world’s most-valued” gold mining company.
Last March, he helped engineer a joint venture with chief rival Newmont Mining Corp. that consolidated assets in Nevada, which Bristow has described as the company’s “main hunting ground” for new gold deposits.
In September, he also struck a US$1.2 billion deal to buy out its troubled subsidiary Acacia Mining Plc, and subsequently resolved a standoff with the Tanzanian government that allowed the company to start exporting gold from its mines there, under a new profit-sharing agreement.
Bristow has said one of Barrick’s competitive advantages under his leadership is that it enjoys a high level of social licence, which allows it to operate in African countries that other mining companies find too risky or encounter problems. Part of this stems from making time to meet with government ministers and an effort to employ the local community, he said.
If we’ve done any damage, we’ll remediate it
Mark Bristow, CEO, Barrick Gold
Still, Acacia had an unusually troubled relationship with the government and communities in Tanzania where it operated, and Bristow has inherited some of its liabilities. This week, a group of seven plaintiffs filed lawsuits against Barrick in the United Kingdom, claiming they faced human rights abuses while Acacia operated the mine.
One plaintiff claims his nine-year old daughter was run over and killed by a mine vehicle; while a 16-year-old claims he was shot in the back and beaten by police.
“Acacia has done some stupid things,” Bristow said, adding, “If we’ve done any damage, we’ll remediate it.”
After the corporate takeover, he said he found ammunition and firearms in the company’s former offices, and handed them over to the local police.
In the year ahead, he said the company is focused on ESG principles, a catch phrase for environment, sustainability and governance, which has increasing clout in the investment community.
“We’ve built the foundation,” said Bristow, “… we’re going to get the market to believe in what we’re doing because you know equity is the most powerful thing in the world.”