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African Barrick Gold’s biggest priority remains its cost-cutting drive. (Brookes/African Barrick Gold)
African Barrick Gold’s biggest priority remains its cost-cutting drive. (Brookes/African Barrick Gold)

Barrick hopes to score with new measures in Tanzania Add to ...

In the midst of a drastic cost-cutting campaign at its three Tanzanian mines, African Barrick Gold PLC paused to make room for a new priority: a soccer match.

The subsidiary of Barrick Gold Corp. has been slashing costs and reducing jobs from top to bottom. But it made an exception in three areas: public relations, community relations and government relations. Those are the only departments where it is adding staff.

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The new priorities are an admission of African Barrick’s need to rehabilitate its brand in Tanzania after years of protests and clashes between local villagers and police at its North Mara gold mine. Dozens of villagers have been killed or injured in clashes at the site in recent years, including another incident last month in which a man was killed and a policeman was injured.

The soccer match between the company’s managers and local community leaders is an example of the company’s new strategy. “It would never have happened a couple of years ago,” Brad Gordon, the company’s new chief executive officer, said at the annual Mining Indaba conference of African mining investors on Tuesday.

To laughter from the audience, he added: “We let them win.”

Mr. Gordon insisted that the company is “starting to get on top” of community issues at North Mara, where thousands of villagers routinely invade the mining site to grab pieces of waste rock where tiny bits of gold can be extracted.

He said the company is developing an underground mine at North Mara, instead of expanding its pits. This could ease tensions by reducing the amount of land that the company needs to acquire from the local community, where 70,000 people live in close proximity to the mine.

But the company’s biggest priority remains its cost-cutting drive. Its parent company, Barrick Gold, has cut or deferred billions of dollars in capital spending over the past year. African Barrick says it has identified $185-million (U.S.) in potential savings and was able to achieve about $100-million in cost reductions last year.

Mr. Gordon said the company has cut its expatriate staff to about 300 from 550 and will keep cutting in the next two years. It is also scaling back its administrative offices, recruiting contractors who are “more efficient,” and even eliminating the position of chief operating officer to save money.

African Barrick dominates the gold industry in Tanzania, producing more than 3 per cent of gross domestic product. With about 100,000 direct and indirect jobs in its mines, it is the country’s biggest private employer. But its costs have weighed heavily on Barrick Gold’s balance sheets in the past.

Its biggest asset, the Bulyanhulu mine, is a world-class deposit that should be profitable, but is hampered by outdated facilities, Mr. Gordon said. “The first time I walked into Bulyanhulu, I thought it had been built in the 1960s, but it’s actually quite new.”

He said the company is retaining psychologists and “cultural transformation” experts to improve its corporate leadership and employee relations at Bulyanhulu, and it will introduce a digital dispatch system to monitor its employees and underground activities.

Mr. Gordon is not the only mining executive to be preoccupied with modernizing mines and rescuing reputations. Anglo American PLC, the huge London-based multinational that remains the biggest miner in southern Africa, has candidly admitted the challenges.

“We continually feel under siege,” Khanyisile Kweyama, the company’s executive director for South Africa, said in a speech to the mining conference. “We have to do far better at eliminating the things we do that damage our reputation.”

Mining companies can’t continue to operate with “old-fashioned ideas, processes, equipment and business models,” she said. The industry is burdened by declining productivity and ore grades, waning ore deposits, rising costs and taxes, and “operating models that are years behind other industries,” she said.

“There are many areas of mining operations that have not changed significantly for decades. Here in South Africa, for example, thousands of miners still work underground, equipped only with hand-held drills, to do battle with some of the hardest rock in the world.”

Follow on Twitter: @geoffreyyork

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