Barrick May Once Again Be a Buyer in Thornton Turnaround Vision

  • `We will demonstrate that we are also discerning buyers'
  • Also starts $750 million bond buyback to bolster finances

After years of cost cutting and assets sales aiming at reducing debt amid sinking prices, Barrick Gold Corp. Chairman John Thornton now sees a future in which the miner will once again be on the prowl for new assets.

Like most large miners, Barrick has had to backtrack on an expansion strategy after gold retreated from a 2011 peak. In 2015, that included more than $3 billion in asset sales and joint ventures aimed at paring back to about half a dozen core mines in the Americas. While the focus remains on tightening operations, with a goal of reducing all-in-sustaining costs to below $700 an ounce by the end of 2019, Thornton said it must go beyond that “base case.”

“We will, over time, prove to you that we are not only discerning sellers,” he told investors in New York Monday. “We will demonstrate that we are also discerning buyers, capable of consistently creating per share value for our owners.”

Any potential acquisition would be approached “very carefully” and would need to be friendly rather than hostile, Thornton said. Barrick’s shares rose 3.5 percent at 2:30 p.m. in Toronto, extending a rebound this year to 74 percent.

His comments come with gold up 14 percent this year, the best performance among major commodities. The haven investment has rallied amid concern that faltering global growth will undermine the case for further rate rises from the Federal Reserve.

Bond Buyback

Barrick began an offer on Monday to buy back as much as $750 million in bonds, its third debt tender in the last six months. The company expects to maintain annual production of at least 4.5 million ounces through 2020. This year, it expects to produce 5 million to 5.5 million ounces.

The company is looking to cut at least $2 billion of debt this year after reducing total debt by $3.1 billion to $10 billion last year through measures that included asset sales and cost cuts. The “medium-term” target is total debt of $5 billion with the company “philosophically” in favor of zero debt. In 2016, Barrick may sell additional non-core assets and create new joint ventures and partnerships to help work toward those goals, the Toronto-based company said Wednesday in a statement.

Board Expansion

Thornton told investors today that Barrick probably will sell its remaining 50 percent stake in the Porgera mine in Papua New Guinea to Zijin Mining Group Ltd. “at some point.” Last May, it sold the first half to Zijin for $298 million. Zijin operates the mine.

Barrick plans to announce two new non-executive directors in the upcoming Proxy, in addition to Rob Prichard and Kelvin Dushnisky, who were recently appointed to the board. That will bring the total number of directors, including Thornton, to 14 as of the AGM.

(A previous version of this story corrected the location of the speech in the third paragraph.)

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