Barrick needed Thornton, a former Goldman Sachs Group Inc. president and the chairman of the Brookings Institution board of trustees, to secure access to governments and protect against resource nationalism, the “ultimate threat to the very lifeline of the mining industry,” Munk said yesterday at the company’s annual shareholder meeting in Toronto.
Thornton also has contacts in China, which may eventually provide an important source of capital for the mining industry, Munk said.
Thornton, 59, who became a Barrick director in February 2012 and was appointed co-chairman in June, received total compensation of $17 million in 2012, according to a March 25 filing. His sign-on bonus has drawn criticism from shareholders including Canada’s six largest pension fund managers after Barrick shares fell this year amid soaring costs, project setbacks and a 15 percent drop in the gold price.
While Barrick believes that compensation should be linked to performance, “it was hard to have someone paid on performance if he would not have been able to join to perform,” Munk said. “We had a bit of a chicken-and-egg situation, and sometimes you have to do things which may not be popular at the moment.”
At the meeting, 85.2 percent of the votes cast were against a nonbinding advisory resolution on executive compensation approach, Barrick said yesterday in a filing. Proxy adviser Institutional Shareholder Services Inc. said April 10 that shareholders should vote against the resolution, and the pension funds said last week they would do the same and criticized the payment to Thornton.
“The Say on Pay results are unprecedented for a major issuer in Canada and the U.S.,” Steve Chan, principal at Hugessen Consulting Inc. in Toronto, which advises boards on compensation, said yesterday by phone.
In his defense of the compensation, Munk said Barrick would pay about $10 million for five earth-moving shovels.
“No one knows whether we bought six more shovels and how much that would do,” Munk said. “I promise you that John will do more for Barrick than six more shovels.”
Munk said Thornton was hired in a “competitive” environment.
“John was a highly desirable, well-known commodity,” Munk said. “When we paid the kind of money we paid John to buy Barrick shares with, we had to secure him.”
Munk, 85, said on April 22 he saw Thornton as a successor who would “take Barrick to a new level as a global player.” He made no mention of a potential succession in his remarks at the shareholders’ meeting.
Barrick rose 7.6 percent to close at C$19.38 yesterday in Toronto, the biggest gain in more than three years. The shares are still down 44 percent this year.
Barrick reported first-quarter earnings excluding foreign- currency losses and other one-time items of 92 cents a share. That beat the 86-cent average of 21 estimates compiled by Bloomberg. Net income declined 19 percent to $847 million, or 85 cents a share, from $1.04 billion, or $1.04, a year earlier, the company said yesterday.
Barrick said it’s considering options including suspending construction at its Pascua-Lama mine on the Chile-Argentina border. The company stopped work on the Chilean side this month after a court accepted an injunction filed by indigenous communities concerned about water supplies.
Barrick (ABX) increased the project’s estimated cost twice last year, to as much as $8.5 billion.
The company won’t keep spending at Pascua-Lama unless there is a “strong indication of the required timeframe to address these issues in short order,” Chief Executive Officer Jamie Sokalsky said at the meeting.
Barrick also is facing calls from the Dominican Republic government to renegotiate the contract for its newest operating mine, Pueblo Viejo.
The company is looking for more ways to cut costs and reduce spending globally, Sokalsky said. Barrick may close high- cost mines, sell assets or mine richer ore to help weather lower gold prices, Sokalsky said.
Barrick said it continues to pursue the potential sale of its energy unit and its 50 percent stake in the Kabanga nickel project in Tanzania.
“I’m hopeful that we will be able to announce something on that relatively soon,” Sokalsky said yesterday on the company’s earnings conference call. Other potential asset sales may be more difficult after gold prices fell, he said.
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