Barrick Gold Corp chairman John Thornton looks to future acquisitions as company comes out of ‘intensive care’

John Thornton looks on Barrick Gold Corp. like a patient finally ready for discharge from hospital and going to abandon the fast living that landed it there.

Barrick Gold Corp has returned on top as Canada’s best-performing stock and also the world’s most valuable gold company

Barrick Gold Corp. has surged to become Canada’s best-performing stock like a two-month rally in the precious metal gives added lift towards the company’s turnaround efforts.

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In his first on-the-record interview in several months, the executive chairman of the world’s largest gold producer discussed all of the hot-button issues – from his perspectives on acquisitions and disposals towards the sprawl of his board to his own controversial pay packet.

Criticized for lacking industry experience, the 62-year-old banker-turned-miner could be forgiven if he made a decision to gloat: on his watch Barrick has transformed from market casualty to darling, culminating with a peer-beating 82 percent stock surge this season. A big-picture guy, he speaks in entire paragraphs from the mile above ground where the way forward is clear: it’s time for Barrick to get off the defensive, albeit cautiously.

“When you’re coming out of intensive care, both for the great of your health and for purpose of reputation, it’s extremely important to be clear and transparent about what you’re doing,” he explained in Ny on Wednesday. “All of those things argue for going slowly.”

Deal Discipline

Thornton’s stated goal would be to make Barrick one of the best companies on the planet this century, in any industry, which means beginning to consider acquisitions. Senior executives have been running through deal scenarios to “exercise the muscles.”

To be sure, the organization is “nowhere close” to an acquisition despite the fact there aren’t any shortage of opportunities amid what had, up to now, been a four-year downturn for gold. “The very first thing we do absolutely should be successful,” Thornton said.

What the company can’t afford is yet another fiasco. In 2011, Barrick expanded its copper footprint with the $7.3-billion acquisition of Equinox Minerals Ltd., swelling its debt as high as US$15.8 billion in 2013. The deal was the single biggest factor that led to a long and painful restructuring. In September, Barrick said hello would close the unit.

Since 2013, Barrick has cut assets, jobs and costs and adopted a decentralized model more similar to a tech firm than a miner. Debts are right down to US$10 billion and also the clients are looking to halve that within the medium term. Asked if he’d consider expanding beyond gold when the company opens its wallet, Thornton said now you ask , “in almost any meaningful time period academic: the answer is no.”

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Asset Sale

Until now, Barrick’s divestment program has excluded its best assets, but Thornton suggested not every preferred properties are untouchable. “Should you define a core asset as a first quartile asset – whatever that definition is – obviously you won’t ever want to sell those,” he said, before adding: “Barrick’s so-called core assets, they’re not all equal.”

Thornton is unapologetic about the company’s quarterly dividend, which peaked at 20 cents in 2013 and it is currently two cents. “Priority one is obtain the debt down. Until we’re inside a healthier financial position, we’re not likely to touch the dividend.”

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Barrick Gold Corp estimates it’ll spend US$2 billion on Nevada, Peru projects when they proceedHow an accident in metals prices makes 2016 an excellent year to construct a mineBarrick Gold looks to keep momentum with US$2 billion credit card debt reduction target for 2016


Pay Solution

Investors can get imminent changes around the most contentious issue of Thornton’s brief tenure: executive pay. At last year’s annual general meeting, more than 73 per cent of shareholders voted against a non-binding pay resolution, largely spurred on by his US$12.9-million package for 2014.

“Whenever we said last year we will fix this, we’ll fix it. In fact we have fixed it. We haven’t actually announced it – but we’ve fixed it.” Investors are to discover the details in a regulatory filing on March 24.



If the news means he will be earning less, the money he’s made on Barrick’s recent stock rally may lessen the sting. Thornton owns about 2.Two million shares, 160,000 which were bought at no more December, before gold rebounded and Barrick catapulted higher. “I’m still a purchaser,” Thornton said. The day after the interview he made good with that promise, buying 300,000 shares. 

On Monday, Barrick gained 2.5 per cent to $18.70 at 10:08 a.m. in Toronto.

Also on Thornton’s to-do list is managing the transition to a leaner board. As of Barrick’s AGM this April, it’ll have 14 directors, with eight joining since he became chairman. Anything over 12 is simply too large, he states.

What he can’t manage, obviously, is price. Barrick considers itself “gold price agnostic,” and runs more conservative price models than its two biggest competitors Goldcorp Inc. and Newmont Mining Corp. Thornton says his goal would be to guarantee shareholders a safe return, having a healthy dividend as well as an occasional “windfall” based on market swings.

When all has been said and done, nothing fascinates Thornton that can compare with China. As chairman of Goldman Sachs Asia, he rebuilt the firm’s Chinese business within the late nineties. Nowadays, he’s a professor at Tsinghua University and flies to China monthly.

Both Thornton and Barrick President Kelvin Dushnisky have been effusive in their praise of Zijin Mining Group Co., the company that Barrick made a partnership at the Porgera mine in Papua New Guinea. He talks of a relationship based on mutual respect and benefit, and including a heavy mentoring component from Barrick.

‘Trust Me’

As a case in point, Thornton says he warned Zijin against wading in and buying Porgera outright, telling executives: “Believe me, when you go see it, it’s likely to scare the hell from you.” Instead, he provided to let Zijin discover the ropes gradually with Barrick management in position. Sooner or later, not soon, he expects Zijin tends to buy the remaining Half.

In the meantime, “they’ve been everywhere, they’ve seen everything,” of the Barrick empire. Thornton believes, someday, Zijin may help turn Barrick’s greatest problem child, Pascua Lama, right into a success by spreading the financial and political risk. The giant project in the Andes continues to be shuttered since 2013, whenever a Chilean court accepted an injunction filed by indigenous groups over environmental concerns.

Thornton is quick to dismiss the issue of whether Zijin or any Chinese investors could take a substantial curiosity about Barrick itself. Although headquartered in Canada, its best assets have been in Nevada, near military bases, and that he believes the Committee on Foreign Purchase of america would reject any Chinese bid.

As for any takeover attempt nearer to home, Thornton highlights that Barrick has regained its place as the most valuable gold producer, which makes it unlikely anyone could afford it. 

“Nothing we’re doing is for the objective of shining ourselves on the market. Like any public company of course, by definition, if a person wants to walk in here and set a large price on the table we’d need to take it seriously. However i see zero proof of that.”

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