Peter Munk started Barrick Gold with $40m of his own money in 1982, knowing not much about mining.
Now 86, and after more than 30 years in the gold business, Mr Munk still talks about Barrick having been the entrepreneurial “young upstart” for much of its life – but it became a company worth $50bn, a Canadian national champion built by a Hungarian-born refugee and the largest producer of gold in history.
Yet the past two years have been tough on Mr Munk, Barrick and the rest of the gold industry, particularly 2013, when Barrick posted $11.5bn of writedowns, cut its dividend and had to raise $3bn in equity to try to cut its debt.
“I would not have chosen this particular year as my final one as chairman, but I don’t get to write the script,” a chastened Mr Munk wrote in the company’s annual report. Barrick is now worth about $21bn.
Mr Munk also acknowledged the damage wrought by Barrick’s acquisition of Equinox Minerals in 2011. The unexpected diversification into copper came at an inflated price, for cash, and sparked doubts last year over Barrick’s debt levels and liquidity. “We thought we were incurring exceptionally low borrowing costs in buying Equinox – preferable to dilution of our equity,” Mr Munk told Barrick’s shareholders.
This week he said his 16 takeovers had “not been a bad run”.
“You cannot grow that fast by drilling; it would require all the drill rigs on earth,” he said. “Yes, not every acquisition turns out perfectly . . . the key is the corrections you make.”
Mr Munk believes the best mining companies are an alliance between top miners and those with business skills and capital markets experience. He cites Ivan Glasenberg at Glencore, Mick Davis, who built Xstrata, and Chip Goodyear, formerly at BHP Billiton, as examples of executives who built successful mining companies without being miners.
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