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A U.S. hedge fund is making a renewed call for changes at Barrick Gold, calling for the breakup of the company and the addition of a mining engineer and geologist to its board.
Mike Morris, principal and founder of Two Fish Management, said Wednesday that there is no compelling reason for Barrick to own a worldwide conglomerate of gold mines. “The market is essentially assigning a massive conglomerate discount to the company,” he said Wednesday.
Since Two Fish first wrote to Barrick demanding changes in April, the gold miner has agreed to sell off its Barrick Energy subsidiary in a series of deals worth a total of $455 million and three high-cost mines in Western Australia to South Africa-based miner Gold Fields Ltd. for $300 million.
But Morris and Two Fish wants more and to that end, the fund has produced a new 78-page presentation detailing the changes it thinks are needed. “This is Canada’s company and this is the world’s largest gold-mining concern and it doesn’t have a geologist or an engineer on its board,” he said.
Two Fish’s exposure in Barrick is relatively small and mainly through call options.
However, Morris said he hoped to bring some of the top Canadian institutional shareholders, including several of Canada’s big banks, which hold a significant stake in the company, on board with his call for changes.
Barrick has recently struggled with problems at its Pascua-Lama project in South America and a falling price for gold.
The gold miner said Wednesday it is continually evaluating opportunities to translate the company’s strengths into higher shareholder returns.
“The company is implementing a disciplined capital allocation framework focused on maximizing free cash flow and risk-adjusted rates of return,” the company said in a statement.
“We believe this strategy will drive superior shareholder returns over the long term.”
Barrick, one of the world’s largest gold producers, has been taking steps to decrease operating costs by lowering capital spending and staffing levels. It has said it will trim $1.5 billion to $1.8 billion from its costs over 2013 and 2014 by cutting capital spending, including laying off staff.
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