Barrick Gold Corp. is hoping to be included in the S&P 500 Index in the United States but plans to keep its head office in Canada, a potentially tricky manoeuvre that, if successful, would open up the giant miner to an even larger pool of investors.
Being included in the S&P 500 would result in increased buying of Toronto-based Barrick from large institutional investors, such as index funds. While specialist mining funds have been in decline over the past decade, index-tracking exchange-traded funds are making up a bigger swath of the investment pool.
“That’s something that’s always been of interest to me, because if we got on the S&P, the index demand would increase substantially,” Barrick chief executive Mark Bristow said in an interview.
Barrick’s primary stock listing is currently on the Toronto Stock Exchange and it has a secondary listing on the New York Stock Exchange.
Gaining entry to the S&P 500 wouldn’t be straightforward. To list on the marquee U.S. index, normally a company must be domiciled in the United States, should be headquartered in the U.S. and have more of its assets and revenue coming from the U.S. than anywhere else.
Barrick is domiciled in British Columbia, its head office is in Toronto, but the biggest component of its assets and revenue are in the U.S.
Mr. Bristow said while the process to get in the S&P 500 is “opaque” and “complicated,” it can be done.
While Barrick has in the past considered moving its head office outside of Canada, notably ahead of its US$6-billion acquisition of Randgold Resources, that is no longer in the cards.
The expense alone – in excess of $300-million – makes it untenable, Mr. Bristow said. “We looked at it. We estimated the costs. We understand what it takes. It doesn’t make sense to us and I think we’ve settled down comfortably in Canada.”
Mr. Bristow also indicated that politically a move to the U.S. would not go down well in Canada.
“Remember all those emotions over Canada, and me, and the head office and all that stuff,” Mr. Bristow said, referring to the period after he took over as CEO of Barrick in 2019.
In an effort to cut costs and boost efficiencies, Mr. Bristow quickly laid off about half of the company’s Toronto head-office staff. He subsequently faced backlash from a number of venerable mining executives, including Franco-Nevada’s Pierre Lassonde, who publicly castigated Barrick about its diminishing presence in Canada and the decline of Canadian representation on its board of directors.
Barrick at the moment is benefiting from surging gold prices and managing to keep most of its mines running despite the worsening COVID-19 pandemic.
On Monday, the company reported adjusted earnings of 23 cents a share for the second quarter, four cents better than analysts surveyed by Refinitiv expected, and reported more than half a billion in free cash flow.
Barrick’s realized gold price in the quarter was US$1,725 an ounce, 31 per cent higher year-over-year.
Last week, the price of gold raced past US$2,000 an ounce, breaching its previous historic high of $1,920 in 2011. “It’s really difficult to mess up in a market like this,” Mr. Bristow said.
Unlike some other large gold miners, including Agnico Eagle Mines Ltd., which was hit hard by temporary mine closings because of COVID-19 restrictions, Barrick’s operations haven’t been affected nearly as much. The biggest COVID-19 hit for Barrick has been at its Veladero mine in Argentina, whose production was affected by the country’s nationwide lockdown in the quarter.
Across Barrick’s 40,000 employees and contractors, 465 have so far tested positive for COVID-19, with 352 recovered. Two of Barrick’s contractors in the Democratic Republic of the Congo have died from the disease.
Mr. Bristow said the company’s COVID-19 strategy is to “stay paranoid” and treat everyone like they might have the coronavirus that causes the disease, so that means continual aggressive screening and testing of its staff.
Barrick on Monday said it will continue to consider mergers and acquisitions and Mr. Bristow said this year it has done due diligence on six companies in Canada, including producers and explorers.
Barrick’s CEO has made no secret of his desire to make an acquisition in Canada. The company has just one mine in its home country and has accumulated $2-billion worth of tax shields from historical losses. Those shields could be potentially offset against future profits should it make an acquisition of a profitable Canadian gold miner.
While not confirming or denying his interest in Vancouver-based gold miner Pretium Resources Inc., Mr. Bristow said, as a single-asset miner, it doesn’t make any sense for Pretium to remain a stand-alone.
When asked what he thought of Red Lake, Ont.-focused Great Bear Resources Ltd., which has a stock market valuation in excess of $750-million based almost solely on promising drill results, Mr. Bristow said Great Bear “makes for a great story,” but it still has “a way to go.”
In 2019, Barrick attempted a hostile takeover of Newmont Corp, the world’s biggest gold miner. The strategy failed, but Barrick ended up signing a joint venture in Nevada with Newmont. Next year, a standstill agreement that prohibits both companies from acquiring the other expires.
As to whether Barrick may make another move on Newmont next year, Mr. Bristow said it would be an “interesting concept to contemplate” and “make for a spectacular movie,” but added that any deal between the world’s two biggest gold companies would have to deliver value.
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