Barrick Gold Corp.’s chairman said he is open to selling part of the company’s top mines, as the world’s biggest gold producer races to slash an additional $2-billion (U.S.) in debt this year.
“The way I look at our job, particularly in a treacherous world, is to create ultimate optionality,” John Thornton told reporters on the sidelines of an event in Toronto on Thursday.
“On one level, everything is on the table all the time. Of course, we would rather not sell all or part of a core asset if we can avoid it. But we don’t always have the choices, so we keep it open,” John Thornton told reporters on the sidelines of an event in Toronto on Thursday. Barrick cut its debt to $10-billion from $13-billion last year by selling a slew of mines, including part of its cornerstone gold mine in the Dominican Republic, called Pueblo Viejo.
Barrick’s debt reduction, along with the jump in gold prices, has helped push the company’s stock up more than 60 per cent this year, making it the third best-performing stock on the S&P/TSX composite index. But with the company’s credit sitting at the lowest investment-grade rating and Moody’s Investors Service warning Barrick and others that it could slash ratings further, the miner is continuing to aggressively reduce its debt. Barrick is aiming to be below $5-billion in the “medium term.”
Other big mining companies such as Freeport-McMoRan Inc. and Anglo American PLC are already in junk status, scrambling to sell assets to reduce their debt.
Barrick said it plans to cut its debt this year through sales of “non-core” assets and the use of cash on hand as well as cash from operations. The company’s non-core operations are more costly to operate. Its five core mines are in the Americas and cost less than $740 to produce an ounce of gold – a low level with bullion trading around $1,200 an ounce.
Mr. Thornton stressed the importance of execution amid the devastating downturn in commodities. “When things get tough, execution becomes everything,” he said on a panel to discuss mergers and acquisitions trends. “The sheer skill of people doing the executing has to be much higher,” he said.
Last year, Barrick ran one of the most competitive processes for the partial sale of its Zaldivar copper mine in Chile. Mr. Thornton said there were 21 companies that were keen to buy a stake or the entire mine, one of Barrick’s biggest cash generators.
But in the end, it came down to two family-controlled Chilean companies. Barrick sold half of the mine for $1-billion to Chile’s Antofagasta PLC – a price that was praised by analysts.
When asked if Barrick would make an acquisition given its stronger financial position, Mr. Thornton said there was a low probability at this point. When Mr. Thornton was co-chairman in 2014, Barrick tried to buy rival Newmont Mining Corp. But the merger imploded over a clash of personalities between Mr. Thornton and Newmont’s chairman.
Mr. Thornton, a former Goldman Sachs president, praised Prime Minister Justin Trudeau and said he was impressed with Mr. Trudeau’s speech in Davos where he said he wanted Canada to be known for its “resourcefulness” instead of natural resources.
“The Prime Minister has made it perfectly clear that Canada is open in every respect,” Mr. Thornton said.
Mr. Thornton said Canada should build a meaningful relationship with China. “The sooner Canada gets on this, the better,” he said. “I think it is highly realistic and could have a big economic impact,” he said. Mr. Thornton, who already has strong ties to Chinese leaders after establishing Goldman Sachs’s presence in China, is also trying to develop a strong relationship between Barrick and the Asian country. Barrick has partnered with one state-owned Chinese miner and appointed a former U.S. diplomat to represent Barrick’s interests there.Report Typo/Error