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Long-suffering shareholders see potential as the company focuses on shedding debt and getting back to gold
It’s quiet at the headquarters of Barrick Gold in Toronto. On a Wednesday afternoon in May, all that can be heard is the soft hum of the ventilation system. A few years ago, around 500 people filled the office, overseeing mining operations that spanned the globe. Today, there are just 140 employees responsible for a much smaller geographical footprint. And that footprint might shrink over the coming year.
For long-suffering Barrick shareholders, this is welcome news. “We’re taking Barrick back to the way it was 15 years ago,” says Kelvin Dushnisky, the company’s co-president. Back then, Barrick was not a bloated organization that had lost investor confidence, nor was it facing a mountainous $13-billion debt in a depressed gold market. Since 2012, Barrick’s share price has fallen by roughly 70%.
While gold prices are a long way from where they were at the height of the 2000s commodities boom—a reality that’s hurt many miners—Barrick’s wounds are mostly self-inflicted. In 2011, founder and chairman Peter Munk pushed the company to spend billions on an underperforming copper mine in Zambia. Barrick also botched the development of what was to be a monster gold mine on the border of Chile and Argentina called Pascua-Lama. These two headaches have cost Barrick about $15.9 billion over the past few years, according to an analyst at Macquarie Group.
Munk retired in 2014 at the age of 86, and it’s now up to John Thornton, Barrick’s executive chairman, to clean up the mess. He has been in the position for just over a year, and he’s already ushered in a host of changes. He has overhauled the entire senior executive ranks. Dushnisky, who joined Barrick in 2002, is the only C-level exec to remain from Munk’s time.
Half of the board members have been replaced; Thornton hired a former British military officer to serve as chief of staff and eliminated the CEO role entirely. Thornton sits at the top of the hierarchy, and Dushnisky and colleague Jim Gowans (also a newcomer) serve as co-presidents. Layers of middle management have been axed.
Thornton is not trying to fulfil Munk’s vision of turning Barrick into a diversified, empire-building mining giant with operations around the world. Instead, Barrick wants to be lean, nimble and focused on the commodity it knows best: gold. Barrick will also concentrate on just a few key mines in the geographies it’s most familiar with, primarily Nevada and South America. The company is committed to cutting its debt, and it is selling assets and forming partnerships to ease the burden. It might seem like a less ambitious goal, but Thornton believes it’s one that delivers better shareholder value.
Some investors are confident Thornton can carry out his plan. “John Thornton is a vast improvement over several past Barrick leaders,” says Seymour Schulich, the prominent mining investor who owns 15 million shares of Barrick. “The company is still a gem, underneath all the crap that’s been piled onto it.”
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