Agoracom Blog

Barrick is up 76% Under Mark Bristow’s Watch — That Even Beats Gold’s Meteoric Rise SPONSOR: Loncor Resources $ $ $ $RSG $ $GOLD

Posted by AGORACOM at 10:58 AM on Wednesday, January 29th, 2020
This image has an empty alt attribute; its file name is Loncor-Small-Square.png

Sponsor: Loncor is a Canadian gold exploration company that controls over 2,400,000 high grade ounces outside of a Barrick JV.. The Ngayu JV property is 200km southwest of the Kibali gold mine, operated by Barrick, which produced 800,000 ounces of gold in 2018. Barrick manages and funds exploration at the Ngayu project until the completion of a pre-feasibility study on any gold discovery meeting the investment criteria of Barrick. Click Here for More Info

The market is buzzing with speculation about Barrick Gold Corp. CEO Mark Bristow’s next move, with Freeport-McMoRan, owner of the giant Grasberg copper and gold mine in Indonesia, regarded as a potential takeover target.

A tough-talking South African on a mission to shake up the mining industry. For years the name that would have sprung to mind was Glencore boss Ivan Glasenberg, but not any more. The sector has another swashbuckling executive to watch: Mark Bristow, head of Barrick Gold.

Since the geologist took control of the world’s second-biggest gold miner just over a year ago he has been a whirlwind of activity. Highlights of the past 12 months include a hostile bid for its arch rival — now a partner in a joint venture — a buyout of struggling subsidiary Acacia Mining and more than US$1 billion of asset sales.

But this is just the beginning for 61-year-old Bristow, an adrenalin junkie who enjoys big game hunting and flying planes. “It has been an amazing year,” he said during a wide-ranging interview. “We now have a solid foundation to build on and probably the strongest balance sheet in the gold industry.”

The market is buzzing with speculation about Bristow’s next move, with Freeport-McMoRan, owner of the giant Grasberg copper and gold mine in Indonesia, regarded as a potential takeover target.

Bristow recently described copper as a “strategic metal” because of the role it would play in the shift to a greener economy. “The new, big gold mines are going to come out of the young geologies of the world,” he said. “And in young rocks, gold comes in association with copper or vice versa.”

Asked if he had discussed the merits of a deal with Freeport chief executive Richard Adkerson, Bristow said there had been “conversations” but these had been more theoretical.

“As the leader of the most valuable gold company in the world, I should be looking at the world’s best gold mines,” he said. “It makes sense for us to be interested in looking at Grasberg and asking ourselves whether Freeport is going to remain an independent company or not.”

A workaholic who maintains a punishing travel schedule, Bristow became chief of Barrick in early 2019 after the Toronto-listed company consummated a nil-premium merger with Randgold Resources, the Africa-focused miner he built into one of the world’s largest gold producers.

The idea behind the deal was to create a gold company focused around five “tier one assets,” mines capable producing more than 500,000oz of gold annually for at least a decade. The merged entity would be run the “Randgold Way” — the decentralised, hands-on management philosophy espoused by Bristow.

When the Randgold merger was announced in September 2018 there were worries about how Bristow would work alongside Barrick’s executive chairman John Thornton, a no-nonsense ex-Goldman Sachs banker.

However, Bristow and his close-knit team of executives have been given their head to run the company. One of his first moves on taking the helm was to cut almost 100 jobs at Barrick’s head office in Toronto in an effort to shape what he calls a “lean, mean machine at the top.” He has also changed the management teams across nearly all of the Barrick assets.

Analysts and investors say Bristow has delivered on the big promises he made at the time of the merger: balance sheet deleveraging, reducing head office costs and asset sales.

“If the gold price stays around US$1,500 an ounce and we generate the same sort of free cash flow as [2019 and] deliver on the rest of our promises as far as realizing the sale of non-core assets we will have zero net debt [by the end of 2020],” Bristow said.

Barrick and arch rival Newmont Corporation’s deal to combine their mines in Nevada into a joint venture, after Barrick dropped its hostile bid for the latter, has also won plaudits.
This has been reflected in Barrick’s share price, which has risen 76 per cent since the Randgold merger was announced — outperforming Newmont (46 per cent) and the gold price (31 per cent).

Barrick Gold Corp’s stock chart since the merger with Rangold was announced Sept. 24, 2018. Bloomberg

Still, some investors lament the passing of Randgold. One top-20 shareholder said it would have delivered a better share price performance had it remained independent — a view backed up by recent results, which show the Randgold side of the portfolio continuing to sparkle while the Barrick portion struggles.

Randgold also boasted a generous dividend policy, something Barrick has yet to match. Analysts estimate Barrick’s dividend would need to rise two to three times from where it is today to be comparable to Randgold’s payout. Bristow said Barrick would look at a long-term dividend policy once its 10-year strategic plan is put in place early this year.
Barrick also remains a very complex business with assets in the Americas, Africa and Asia, leaving Bristow and his management team stretched.

“There is a core of 10 Randgold executives who run the business. They used to fly around all the assets once a quarter,” said one analyst who used to follow Randgold but does not cover Barrick. “That is more difficult to do now given the size and scale of the business.”

A photo of Rangold’s open-pit gold mine in the Democratic Republic of Congo in 2014. Rangold Resources

James Bell, an analyst at RBC Capital Markets, also said the integration of the two companies had become more complicated because some of the assets flagged as potentially noncore at the time of the Barrick deal were now seen as less disposable.

“A good example is Porgera [a mine in Papua New Guinea]. This was an asset initially flagged as noncore but that’s an asset the company is now very excited about because management have seen the geological potential,” he added.

Bristow said Barrick would continue to divest assets where it makes “good, commercial sense”, citing the recent sale of its stake in the Massawa gold project in Senegal for an upfront payment of US$380 million.

Bristow, who had open heart surgery in 2017 after a doctor spotted a problem during a routine medical to renew his pilot’s licence, said he did not know when he would step down.

“I don’t have a particular timeframe but I gave the market a [promise of at least a] full five years. I am certainly committed to that,” he said, adding that there was already a pool of executives that are qualified to lead the organization. “And you can imagine how much better they are going to be with a bit of coaching in the next couple of years.”


Tags: , , , , , , , , , , , ,

Comments are closed.