Mark Bristow, Barrick Gold Corporations' chief executive officer and president, at the company's head office in Toronto, on May 7.Cole Burston/The Globe and Mail
Barrick Mining Corp. ABX-T chief executive Mark Bristow is signalling some regret that he didn’t buy Canadian gold miner Kirkland Lake Gold Ltd., a multibillion-dollar transaction that would have given the company a much bigger footprint in its home market and a lower risk profile.
Toronto-based Barrick’s shares have underperformed some of the company’s peers over the past few years, in part because of its exposure to risky jurisdictions outside of Canada. Its Malian operations, which accounted for about 15 per cent of its production, were shut down in January, amid a dispute with the West African country over dividing the economic spoils. Mali also jailed four Barrick executives and has an outstanding arrest warrant on Mr. Bristow.
In addition, Barrick is embarking on the multiyear, multibillion-dollar construction of a giant copper and gold mine in Pakistan. It already spent about seven years in arbitration with Pakistan before reaching an agreement to build the mine. Some investors are spooked by the potential risk of operating in Pakistan and Mr. Bristow himself in a conference call with analysts on Wednesday conceded that the value of the project is not reflected in its share price.
A few years ago, Barrick passed on an opportunity that would have fundamentally altered its risk profile. Barrick had the chance to buy Kirkland Lake Gold Ltd. when the company was for sale. Kirkland’s mines were located in Canada and Australia, both of which are considered the world’s safest regions for mining. But at the time, gold prices were trading at much lower levels and Kirkland’s costs to extract the precious metal were higher than Barrick was comfortable with, so the investment case wasn’t clear.
“I sat with the Kirkland Lake CEO, and said, ‘Show us how we get just break even,’ ” Mr. Bristow said in an interview.
Barrick ultimately walked and Toronto-based Agnico Eagle Mines Ltd. AEM-T instead bought Kirkland in a $13-billion deal.
In the years since Kirkland was in play, gold prices have roughly doubled to around US$3,380 an ounce, and the acquisition has helped propel Agnico past Barrick to become the second-most valuable gold company in the world, and the biggest in Canada.
Mr. Bristow now concedes that the Kirkland Lake deal was a “good opportunity,” even if it didn’t meet the company’s investment criteria at the time, and he said he is the “first one to celebrate” the successes of Agnico Eagle.
“They took a bet, and the gold price did them well. It‘s got nothing to do with anything else. And bully for them because you know 99 per cent of successful business is based on good luck.”
The admission by Mr. Bristow that a competitor pulled off a successful M&A deal is a rarity. He has mostly slammed M&A by competitors as being far too expensive, and something that destroys value. Since he became CEO of Barrick in 2019, following the acquisition of his own Randgold Resources Ltd., Barrick has not done any major acquisitions. Instead it has tried to grow by investing in its own assets, expanding existing operations, and now embarking on a major new mine construction in Pakistan.
Had Barrick bought Kirkland it would also have a much bigger presence in Canada. Instead, Barrick is trying to sell its only Canadian mine, Hemlo in Northern Ontario. Hemlo is among the company’s smaller mines and its costs are on the higher end of Barrick’s operations. With gold prices near a record high, the company is in a much better position to realize a higher price compared to 2019 when it last tried to sell Hemlo.
Mr. Bristow on Wednesday in the conference call said that the company is still committed to Canada despite Hemlo going on the block, pointing to exploration work the company is doing in Quebec.
Mr. Bristow earlier in the year told The Globe and Mail that Barrick has explored redomiciling to the United States, where its single biggest gold operations are based. On Wednesday, he indicated that the move was not imminent but still being discussed.
“It‘s something we consider all the time. It‘s a regular debate in our board, at least on an annual basis,” he said during the call.
Barrick has lately been concentrating on trimming its portfolio as it builds a war chest to support its efforts in Pakistan and other projects, including Lumwana in Zambia and Fourmile in Nevada. A few weeks ago, Barrick announced the sale of its 50-per-cent stake in the huge Donlin Gold project in Alaska for US$1-billion to U.S. activist Paulson Advisers LLC and Novagold Resources Inc.