Barrick Gold Corp. chief executive officer Mark Bristow says it’s too early to jack up the company’s dividend in a big way, amid the continuing chaos of the COVID-19 pandemic and uncertainty over the outcome of the U.S. election.
Aided by record high gold prices and lower taxes, Toronto-based Barrick on Thursday swept past expectations in the third quarter, reporting a net profit of US$882-million. On an adjusted basis, the world’s second-biggest gold miner made 41 US cents a share, 8 US cents better than analysts surveyed by Refinitiv expected.
Historically sought out as an investment refuge in times of extreme financial stress, gold bullion has been one of the best-performing asset classes this year. In August, gold hit a new historic high of US$2,050 an ounce, powered in large part by the pandemic.
While Barrick on Thursday said it is increasing its dividend by 12.5 per cent to 9 US cents a share, the bump was notably smaller than some of its senior gold mining peers. In the past week, Agnico Eagle Mines Ltd. and Newmont Corp. have increased their payouts by 75 per cent and 60 per cent, respectively. In an interview, Mr. Bristow said he felt no pressure to follow the herd.
“Right now, we are still in an uncharted phase of this global pandemic and the consequential meltdown of global economies and, on top of that, heightened geopolitical risk across the globe,” he said.
“I just think it’s prudent to wait a little longer, to ensure that we’ve got clearer visibility regarding the runway ahead of us, because this global situation is still not clear and the risks associated with the presidential election in the U.S. and other issues globally can easily derail this world further, and we’ve seen enough derailment to last us a lifetime in the last two quarters.”
Through the pandemic, Barrick’s operations have run fairly smoothly. The biggest impact has been at its Veladero mine in Argentina, where production was temporarily affected by a nationwide lockdown in March, and subsequent limits on the movement of workers in the country. Positive COVID-19 cases amongst Barrick’s work force of roughly 40,000 peaked in July at 275. At last count, that number had fallen to 33.
Barrick said it is on track to hit its production forecast for the year of 4.6 to five million ounces of gold, despite one of its mines being out of commission. In April, Barrick suspended production at its Porgera mine in Papua New Guinea after the PNG government refused to renew its mining lease over alleged claims of environmental infractions.
Last month, Barrick reached a provisional pact to end the fracas. If ratified, it would see it grant a larger proportion of the profits to the government, and give away a bigger piece of the equity. Barrick currently owns a 47.5-per-cent stake in the mine with China’s Zijin Mining Group, while the PNG government owns the rest. While Mr. Bristow expressed optimism a binding agreement will be reached soon, he cautioned it will take a while for the mine to be up and running again.
“It could take quite a few months before we are able to bring it back online,” he said. “And then it’ll be a ramp-up process to get it back to full production.”
Those steps will include opening up access routes into the mine, bringing back thousands of workers, putting the power infrastructure back in place and restocking the processing plant.
As Barrick nears a resolution in PNG, it is facing increased uncertainty in another frontier country. In August, in a military coup in Mali, then-president Ibrahim Boubacar Keïta was ejected from power. Retired colonel Bah Ndaw was sworn in as Mali’s interim president in September. Now, at the recommendation of the country’s Auditor-General, his administration is reviewing existing contracts with mining companies.
Barrick operates the Loulo-Gounkoto mining complex in western Mali. Mr. Bristow expressed confidence that financial terms between Mali and the company won’t be tinkered with, pointing out that it is already the biggest taxpayer in the country, and a major contributor to GDP. Over time, Barrick has sweetened the pot for the Mali government, including waiving its right to withhold dividend payouts until it recouped all of its initial investment.
“We split the economic benefits in favour of the Mali government, rather than us,” Mr. Bristow said.
“I definitely don’t see it as sinister at all,” he said of the government’s review.
Shares in Barrick rose by 7.9 per cent to close at $38.50 apiece Thursday on the Toronto Stock Exchange and have risen 59 per cent this year.
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