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Canadian businessman and philanthropist Peter Munk (Fernando Morales/The Globe and Mail)
Canadian businessman and philanthropist Peter Munk (Fernando Morales/The Globe and Mail)

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Exclusive interview: Peter Munk on ‘hubris,’ ‘stupidity’ and the future of Barrick Gold Add to ...

“Does that mean that we don’t fight?” he continued. “That’s what I want. I want debate. I want to foster a diversity of opinions.”

“What makes me admit of being very articulate and very passionate, how else can you build a company? You want me to be a wilting flower? I mean, wilting flowers don’t build companies.”

When all the problems hit, investors wondered “What’s wrong with Munk, he must be a demonic dictator to his board that he has people there for 20 years 30 years, they must be nothing but figureheads who just nod. They have forgotten that the same figureheads for 25 years helped build Canada’s most successful company. Nothing has changed,” Mr. Munk said.

China calling

Trophies to Barrick adorn the shelves of Mr. Munk’s dimly lit office, with views to Toronto’s east end, where he once knocked on doors selling vacuum cleaners. There are pictures of Bob Smith, Mr. Munk’s wife and children, and others of Mr. Munk with various members of his board and world leaders.

Part of his grand plan is to align Barrick closely with China. He believes it is in China’s interest to diversify its access to resources, and he foresees the Asian country working in tandem with Barrick on projects such as Pascua Lama. For that reason he courted Mr. Thornton, who first started dealing with China’s vice-premier at the time Zhu Ronghi in 1994 when he was at Goldman Sachs.

Mr. Munk’s interest in China stems back to the 1990s when there was little talk about the potential of China’s economy. Mr. Munk and Paul Desmarais, the late chairman of Power Corp. of Canada, travelled to Beijing to pitch the Chinese on developing gold mines. The idea fell flat at the time, but has since become the number one focus for Mr. Munk. A framed photo of Mr. Munk, Mr. Desmarais and Mr. Mulroney meeting with the former Chinese premier Li Peng in Beijing is prominently displayed in Mr. Munk’s office.

Mr. Munk has wanted to transform Barrick into a North American mining powerhouse of the likes of Australia’s BHP Billiton, Anglo-Australian Rio Tinto, and Brazil’s Vale SA, three of the largest resources companies in the world.

“Look England has got RTZ [Rio]. Australia has got BHP, South Africa has got Anglo, Latin America has got Vale and there, in the middle of a mining country, in the middle of the largest capital pool, North America, of the world, the second-largest consumer of all the raw materials and we have don’t have a single …,” Mr. Munk says, his voice rising as he shows the passion and oratory that has made Barrick annual meetings an attraction for shareholders for years. “Everyone has left, Inco has left, everyone is going bust, because there is nobody here who had the ability, the determination and the vision – the vision to create a North American entity.”

Nearly every big Canadian mining company has been taken over by foreigners. Inco was taken over by Brazil’s Vale. Falconbridge went to the former Swiss-based Xstrata, and Alcan to Rio Tinto.

“What happened to Inco, Falconbridge and all the others, it ain’t going to happen as long as I am alive,” Mr. Munk vowed.

Mr. Munk said Barrick will always be headquartered in Toronto, the city that became his home after he fled the Nazis in Budapest in 1944. His voice lowers as he talks about his gratitude for Canada, a country that accepted him and eventually his grandfather, his mother and her husband. Mr. Munk says his number one debt is to this country. His friends point to his Order of Canada as one of his proudest achievements. Mr. Munk has donated upwards of $160-million (Canadian) to various Canadian institutions through his charitable foundation.

Equinox and the past 18 months have tarnished Mr. Munk’s tenure at Barrick. But RBC’s Mr. Nixon said people should look at the entire picture. “He took a company and basically set out to build the biggest gold company in the world and did it. That is something that is not only difficult but special in terms of business leadership,” Mr. Nixon said.

Seymour Schulich, a former mining executive and Newmont director, calls Mr. Munk a great Canadian. Mr. Schulich, also a well-known philanthropist, recently bought Barrick shares and says he is a long-term investor in the company. “The underlying assets are very, very good,” Mr. Schulich said.

Mr Munk is pensive as he reflects on his legacy at Barrick.

“If nobody would try, of course nobody would make it,” Mr. Munk said.

“I must have given 25 lectures at business schools and my theme number one is: dream big, dream big. Put all your efforts into realizing your dreams. Be aware that many of you will fail and do not be afraid of failure. Failure can be ennobling. Failure can be the biggest teacher you have ever had.”

Single page

Barrick vs. Spot Gold

1. The beginning

May 1983: Barrick Resources goes public. Controlled by Peter Munk and his partner David Gilmour, the firm holds mainly oil and gas exploration assets, with a few gold interests.

July 1984: Barrick buys Camflo Mines, a Toronto company that has gold mining operations in Quebec; its first substantial gold asset.

Dec. 1986: Barrick buys the Goldstrike mine in Nevada, which proves to be an enormous gold resource. The company now owns six North American gold mines.

2. Early success

August 1994: Barrick buys Lac Minerals for $2.3-billion, after winning a bidding war with rival Royal Oak Mines. This makes it the world’s third-largest gold producer

3. Mergers and acquisitions

June 2001: Barrick merges with Homestake Mining in a $2.2-billion deal, creating the world’s second largest gold producer.

Oct. 2005: Barrick launches a hostile bid to buy Placer Dome. When the $12.1-billion deal closes in early 2006, Barrick is the largest gold company in the world.

May 2007: The company eliminates the last of its hedge contracts, allowing it to take full advantage of gold price increases (and exposing it to falling prices).

4. Trouble on the horizon

April 2011: Barrick launches $7.3-billion takeover of copper producer Equinox Minerals, only to write down half of that value two years later when copper prices slump.

June 2012: CEO Aaron Regent is fired after four years on the job, a period when the Barrick share price stagnated despite a big jump in the price of gold.

5. The decline

Oct. 2013: Barrick halts construction on its Pascua Lama gold and silver project that straddles the border between Argentina and Chile, and launches a $3-billion stock sale.

Dec. 2013: Barrick announces that Peter Munk will step down as chairman at the next annual meeting, in 2014.

Chart shows daily closes. Index: Feb 25, 1987 = 100
Graphic by Richard Blackwell and John Sopinski
Source: Bloomberg

 
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