Barrick Gold Corp. is banking heavily on its operations in Nevada, where it has upgraded its Turquoise Ridge property to ‘core mine’ status in a bid to double its annual production and is expecting to launch its Goldrush project within the next few years.Bloomberg/Barrick Gold Corp.
As it continues to deal with repercussions from an ill-fated copper deal in Africa, don't expect Barrick Gold Corp. to rush into any major mergers and acquisitions deals any time soon.
"When times are good, companies overpay for mediocre assets and invest in projects with low returns," said executive chairman John Thornton in a webcast to investors on Thursday.
"At Barrick, this will not happen. We are putting in place the discipline to make certain this is the case."
Mr. Thornton said that Barrick had examined a number of external M&A opportunities last year, but passed.
Barrick is attempting to make up for a significant M&A misstep from the past.
In 2011, Barrick paid US$7.3-billion in cash to buy Equinox Minerals Ltd., whose chief asset is a Zambian copper mine. The acquisition, which coincided with a global plunge in commodity prices, proved to be a financial disaster. Less than two years later, Barrick wrote down the value of the assets by US$3.8-billion.
Mark Hill, chief investment officer at Barrick and formerly a private equity mining investor, will be applying extra scrutiny to any potential M&A transactions, said Mr. Thornton.
During the same webcast, Barrick's chief financial officer Catherine Raw also stressed the company's disciplined approach to deal making. "The first thing is not to assume we can solve our problems through M&A," she said.
Ms. Raw added that Barrick's focus will instead be on its existing portfolio of assets. But barring major acquisitions, the company's long-term production is declining.
Last year, Barrick's production fell 3.5 per cent to 5.3 million ounces. The company recently said it expects to produce between 4.5 million to five million ounces of gold in 2018 and to average between 4.2 million and 4.6 million ounces a year from 2019 to 2022.
In a release on Thursday, Barrick said it has "the potential" to average annual production "above four million ounces" between 2023 and 2027.
Barrick also upgraded its Turquoise Ridge property in Nevada to "core mine" status as it aims to double annual production from the site. Last year Barrick's production share of the mine came to 211,000 ounces. Newmont Mining owns 25 per cent of the property.
Meanwhile, Barrick's new Goldrush project in Nevada – which has 1.5 million ounces of gold reserves – is expected to go into production between 2021 and 2022.
Gone from the company's firm mine plans is Pascua-Lama in South America. The company recently took the project's roughly 14 million ounces of gold out of its "reserves" and placed in the far less economically viable "resources" category.
"At present, the Pascua-Lama project does not meet Barrick's investment criteria," the company said.
Barrick is exploring the viability of building an underground mine at the site, in conjunction with a Chinese partner, but the project is on the back burner.
Mr. Thornton acknowledged that Barrick has come up short in its performance over the past few years, but expressed confidence the senior gold mining company can do better. "If we were an athlete, we would say we were in better shape but not yet headed to the Olympics, much less winning any medals," Mr. Thornton said in the webcast.
Mr. Thornton said the company had "failed to deliver,"or has yet to deliver, in a number of key areas of its business. He singled out its subsidiary Acacia PLC, currently in a dispute with the Tanzanian government, as well as its Veladero mine in Argentina, which encountered production problems last year, as "glaring examples" where the company had fallen short.
"We've made good progress in [2016 and 2017] but we're nowhere near where we want to be, and [where] we know we can, and will be," he said.
Barrick also announced on Thursday it is that chief operating officer Richard Williams will take on a new role as the chairman's executive envoy to Tanzania. Mr. Williams has been leading talks on behalf of Acacia Mining with the Tanzanian government. London-based Acacia is currently under a gold concentrate export ban in the country and accounts for about 5 per cent of Barrick's gold production.
Mr. Williams joined Barrick in 2014, and is a former commander with the British army.
Greg Walker, who is senior vice-president of operational and technical excellence with Barrick, is taking over the operations position, replacing Mr. Williams.
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