Barrick Gold Corp Chairman of the board John Thornton looks on during their annual general meeting for shareholders in Toronto, April 28, 2015.MARK BLINCH/Reuters
Everything is on the table at Barrick Gold Corp., as the once-prolific miner wrestles with consistent pressure on its share price and growing uncertainty about the bullion market.
After years of hesitation, Barrick is making it clear to investors that its executives are weighing every single option available. Their immediate goals: to slash the company's crippling debt load and to cut everyday costs.
As it goes about this gargantuan task, the company's messaging has changed, making this financial review the focal point of its commentary. Instead of elaborating on mining operations, Barrick executives spent the majority of their quarterly earnings call Thursday morning walking through their blitz to shore up the balance sheet.
Earlier this year, the company zeroed in on its debt load, setting a goal to reduce it by $3-billion by 2016. The miner is already 90 per cent of the way there, largely because of asset sales, but executives are making it clear they won't tone down their rhetoric. If anything, they want to do more because investors are fast losing hope in gold miners.
"We know there is more we can do," co-president Kelvin Dushnisky said on Thursday's earnings call. Adding to this sentiment, Jim Gowans, the miner's other co-president, stressed that from here on out, the miner can't coast. "In today's environment, cost-cutting is simply not enough," he said.
Their comments suggest Barrick has fully realized it can't keep holding out hope that it will return to its glory days, when investors gave it extra respect for being the world's biggest gold miner. The market today looks dramatically different, even though the gold price still hovers around $1,100 (U.S.) per ounce, and that's forced the company to throw everything at the wall.
Major changes announced this quarter include: cutting the dividend 60 per cent, to 2 cents per share quarterly; putting six more projects in Nevada and Montana up for sale; and setting a goal to cut $2-billion out of its spending budget by the end of 2016, with a particular focus on operating costs.
For asset sales, Barrick has ring-fenced five core sizable mines it would like to keep, but remains open to ideas for all the others. On the cost-cutting front, the miner is going so far as to deposit waste from certain projects in the mine pit instead of a few miles away, and to use solar power as an energy source where possible.
Once the aggressive review is complete, "you will see a Barrick that is leaner, more focused, more profitable and with materially less debt," Mr. Dushnisky promised.
Barrick's latest efforts to raise cash include signing a so-called streaming deal on its stake in the Pueblo Viejo mine in the Dominican Republic, which will give it $610-million in cash upfront, as well as selling a 50-per-cent stake in its Zaldivar copper mine in Chile.
At the end of June, the miner's debt stood at $12.8-billion. The company's shares climbed 5 per cent to $9.10 by midday Thursday, a sign that investors appreciate the executives' serious tone. However, the stock is still down 55 per cent in the past year.
Barrick's aggressive debt reduction and cost-cutting strategy dovetails with a new overarching strategy for the miner. Founder Peter Munk had dreams of turning Barrick into a giant diversified mining company, but current chairman John Thornton has cancelled those plans, preferring instead to return to the company's gold roots.
In February, Mr. Thonton made comments that suggested he believes Barrick had lost its way. He wants the company to get back to its "original DNA."
"First and foremost our focus is gold," he said at the time. "We have no plans to diversify into other metals and we have no plans to add to our existing copper position."
With files from Reuters
Tim Kiladze