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African Barrick Gold’s North Mara mine in northeast Tanzania is about 100 kilometres east of Lake Victoria. Bradley Gordon, the former CEO of Intrepid Mines Ltd., has been tapped to take the reins of the struggling African miner.


An Indianapolis-based hedge fund is turning up the volume in its campaign to shake things up at Barrick Gold Corp., and has sent the company 78 pages of ideas it says will help boost the stock price of the world's largest gold miner.

Two Fish Management LLC says that the gold producer's shares are undervalued because of its overpaid board of directors, operational problems and "value destroying capital allocation." But the firm is seeking attention a little more aggressively after taking aim at Barrick's board compensation and encouraging the sale of less profitable assets through a letter in April.

"It's unbelievable that the biggest gold mining company in the world doesn't have one geologist or mining engineer on the board," said Mike Morris, a co-founder and manager of Two Fish, which has invested in 70,000 Barrick shares, mostly through options, and has about $165-million (U.S.) in capital under management.

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Toronto-based Barrick has struggled with soaring costs, project delays, and has written off more than $12-billion this year as gold prices have fallen by 17 per cent.

The company recently told South American news organization Emol that it would try to "make things right" with environmental regulators, after violations suspended its Pascua Lama gold and silver project in South America. Barrick's share price is down 46 per cent this year, compared with a 22-per-cent drop in the S&P/TSX capped diversified metals and miners index. The broader S&P/TSX composite index is up 2.5 per cent in 2013.

Two Fish says Barrick needs to simplify its operations and focus on North and South America, spinning off or selling African Barrick, Australia Pacific and Global Copper businesses. In the short term, the hedge fund wants to replace at least two people on the 13-member board with a mining engineer and a geologist, and tie compensation to new measurements of the company's success.

Barrick management declined to comment on the report, but said the "company is implementing a disciplined capital allocation framework focused on maximizing free cash flow and risk-adjusted rates of return. We believe this strategy will drive superior shareholder returns over the long-term."

On Aug. 22, the miner sold three mines in Western Australia for about $300-million (U.S.) and could look to sell more Australian properties in the future. And since the company spun off African Barrick Gold assets in 2010, it is making moves toward becoming an Americas-focused miner without any added pressure.

"I think Jamie is doing a decent job of refocusing on North and South America in the context of still operating under this conglomerate model," Mr. Morris says of Barrick CEO Jamie Sokalsky. "But the problem is the structural issue that it's a conglomerate that's the bigger issue."

Alarm bells sounded at Barrick in April when seven major Canadian pension funds took issue with Barrick's compensation plan. More than 85 per cent of the company's shareholders voted against a $17-million payout to new co-chairman John Thornton and other multimillion-dollar sums to board members, including company founder Peter Munk.

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The Globe reported in June that the company is recruiting a number of independent directors. That process is still ongoing, but Two Fish is waiting for an official announcement from the company.

Mr. Morris says the Canadian Coalition for Good Governance should lead the charge. The top 15 Canadian institutional shareholders together control 15 per cent of the company, and they stand to make $4-billion in profits by "reforming Barrick's governance," Two Fish's most recent report states.

Two Fish's next step is to ask the corporate governance group for feedback, but Mr. Morris is still in conversations with other buy-side shops that have significant stakes in Barrick. The risk of a proxy fight on the doorstep of Barrick is low right now since Canada's big banks and pension funds seem unlikely to get in the ring, but Mr. Morris said Two Fish would entertain the idea if he felt he could get the votes.

(Jacqueline Nelson is a Globe and Mail Financial Services Reporter.)

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