Is the writing on the wall for Barrick
Barrick Gold 's 2019 merger with Randgold was an epoch-defining transaction that set the tone for the gold sector for this decade as former chief executive Mark Bristow eschewed non-premia mergers and acquisitions to avoid the capital destruction of the previous cycle.
At the time of the Randgold transaction, Barrick was the world's largest gold producer, and this transaction forced the pace of consolidation in the sector, with rival Newmont responding with a mega-merger of its own, taking Goldcorp. Newmont, now the world's largest gold producer, has subsequently divested most of the assets it acquired with Goldcorp.Now, the writing appears to be on the wall for Barrick as we know it. The company jettisoned Bristow in late September, shortly after it had jettisoned GOLD, the best ticker in the gold space on the New York Stock Exchange, as part of a rebrand to Barrick Mining, under the ticker B.Bristow's reluctance to pay a premium saw the company slip from being the alpha dog and fall behind rivals Newmont and Agnico Eagle Mines. The B ticker encapsulated this fall.Now Bristow's grand fusion stratagem may be picked apart, as rumours circulate of that Barrick will be separated. Mining Journal first heard rumours of a potential split in August into "good Barrick and bad Barrick" a source said, which was another way of saying low-country risk Barrick and high-country risk Barrick. The idea being mooted is believed to be to separate the Americas' operations from those in Africa and Asia.It is believed that Barrick's board and chair, John Thornton, are exasperated by Bristow's hardline stance with the government of Mali seeking to increase the government's take. This has led the government to take control of its Loulo-Gounkoto mine and three tonnes of gold stored there, imprison key mine executives, and issue an arrest warrant for Bristow.Bristow was unhappy that the mining sector did not provide a unified front with Endeavour Mining, B2Gold, and others accepting a new fiscal regime.Loulo-Gounkoto provided about 18% of Barrick's production in 2018. Interim chief executive Mark Hill has made getting the company executives released a priority, and is seeking terms with the Malian government for the company to resume operation of the mine.In other jurisdictions, Bristow's hardline approach bore fruit, resulting in renegotiated agreements in Tanzania, the Dominican Republic, Papua New Guinea and Pakistan, culminating in the ongoing construction of the Reko Diq copper project.AmericasWhoever becomes the new Barrick chief executive will likely be aligned with shareholders on the split, as few would relish Bristow's travel schedule that saw him visit operations two or three times a year. "I told the participants in one of our talent growth seminars to think carefully about what they want. My multi-million dollar salary may sound attractive, but I have to earn it, and that means I am always flying," Bristow previously told Mining Journal.The jewel of the Americas operations would be Nevada Gold Mines , the decades-anticipated fusion of Barrick's and Newmont's Nevada operations, which was created through a masterstroke of manoeuvring by Bristow, when he took a run at acquiring Newmont in 2019 to force the Nevada merger to occur. Bristow's swan song was announcing a preliminary economic assessment at Four Mile in Nevada two weeks before his exit, with average annual gold production of 600,000-750,000ozpa at an estimated all-in sustaining cost of US$650-750/oz, for 25 years following an initial capital cost of up to US$1.7 billion. Barrick has a put option under which Nevada Gold Mines is obligated to buy Four Mile at market prices, which would require Newmont to pay billions of dollars to its rival or dilute its NGM position.The success of Four Mile may have been Bristow's undoing and fueled the desire to split the company by creating the possibility of Americas Barrick being a world beating gold producer.
John Thornton Mali Mark Bristow Goldcorp Four Mile Newmont Loulo-Gounkoto
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