Peter Munk, 88, founder and former chairman of Barrick Gold, is plotting his retreat to Lyford Cay, a gated community for the wealthy in the Bahamas.Fred Lum/The Globe and Mail
Editor's note: Barrick Gold founder Peter Munk has died at 90
As Peter Munk slips uneasily into a slower life – the old lion insists he is not retiring – he doesn't really want to be remembered for Porto Montenegro, the superyacht marina that he and his billionaire friends built on the Adriatic Sea. He wants to be known for Barrick Gold Corp., the Toronto mining company that he cursed only two years ago but now praises as an industrial Lazarus.
On Friday, Mr. Munk, who is 88 and now avoids transAtlantic flights because of a heart condition, announced the sale of Porto Montenegro to the Investment Corporation of Dubai (ICD), the Persian Gulf country's sovereign wealth fund, for an undisclosed amount – thought to be about €200-million ($294-million).
For Mr. Munk, the sale marked the end of a 10-year development slog that resulted in the creation of one of the world's biggest marinas. The former mining magnate always assumed that a sovereign wealth fund would take it over, and ICD emerged on top. Speaking from the marina, Mohammed Al Shaibani, executive director of ICD, said Porto Montenegro "represents a strategic fit with our expansion plans into international luxury, real estate and hospitality sectors whilst providing exposure to new geography."
Financially speaking, the sale is no big deal; it may have earned a small profit for the Munk-led investment group that turned a rotting, former Yugoslavian naval base into one of the Mediterranean's most glamorous yacht parking lots. Its greater significance is that it marks the end of an era for Mr. Munk. He says he's still got a few deals left in him, but he is unlikely to take on a project as big again.
He's more concerned with his legacy. "Barrick is my legacy," he said in an interview this week. "It's what I'm known for. It's what I did for 34 years. … Barrick is completely back to its glory days."
Well, not quite, but there is little doubt that the worst is over for the top name in the gold business, one of the few Canadian mining companies that can claim global player status. A couple of years ago, Barrick shares, and the shares of other resources companies, were taking BlackBerry-like plunges, victims of stunning cost overruns at projects in Latin America and the falling price of gold. Barrick went below $8 a share last year from more than $50 in 2011. In the past six months they have gained 137 per cent.
Mr. Munk, Barrick's founder and former chairman, can't take credit for the turnaround. That goes to John Thornton, 62, the lavishly paid former Goldman Sachs president who became Barrick's executive chairman in 2014 (Barrick has no CEO). "You asked me what I would have done differently," Mr. Munk said. "I would have made sure that Thornton had joined us a year earlier than he did."
Mr. Munk still lives and breathes Barrick. As chairman emeritus, he attends board meetings but can't vote. If Mr. Thornton asks, Mr. Munk will offer him advice on strategy. He says he managed to extract a commitment from the American executive that, no matter what, Barrick's headquarters would not leave Toronto, once the world's mining centre, now largely depleted of big mining companies after a hollowing out that saw Inco, Falconbridge and other biggies vanish through takeovers. "It was a fundamental part of our agreement not to shift Barrick out of Canada," Mr. Munk said.
There was a rumour that one of the deal breakers in the 2014 attempt to merge Barrick and Newmont Mining Corp., other than management control, was head office location – Toronto or Denver? (Mr. Munk also tried to get Glencore of Switzerland, the world's biggest commodities trader, interested in a merger.)
Now that Barrick has risen from the dead, might a merger attempt be revived? Mr. Munk won't comment directly, but it's an open secret that Barrick and Newmont would consider the idea again because the merger that made sense two years ago would still make sense today. Crucially, the two companies could consolidate their adjoining properties in Nevada and Australia and slim down their merged head office. Costs would fall, and gold mining is all about dropping the break-even price to help insulate the balance sheet from the typically volatile price of gold.
"Of course it makes sense to consolidate," Mr. Munk said, noting that Barrick has always been one of the industry's most powerful mergers and acquisitions machines. Its buying spree included Lac Minerals Ltd., Nevada's Goldstrike mine, Homestake Mining Co. and Placer Dome Inc.
The buying spree worked until Barrick almost blew its brains out on the overpriced 2011 purchase of copper company Equinox Minerals Ltd. – $7.3-billion – and cost overruns at the Pascua-Lama project in the Andes. In an interview two years ago at his ski chalet in Klosters, Switzerland (a beloved second home he may not see again, given the stress inflicted by transatlantic fights), Mr. Munk said: "I could not believe the day [in 2012] when I was told we could be multibillion dollars over budget. For 30 years, we never missed a budget."
After the twin debacles, Barrick, under Mr. Thornton, overhauled the top management team, sold properties and commenced a massive debt and cost-crunching exercise. Mr. Munk now thinks the company is ready to burst back onto the deal-making scene. "Barrick will be a world-leading mining company again and possibly move into other activities," he said, implying that minerals other than gold and copper could be added to the mix – a transformation that might not sit well with investors who would fight any more dilution of the typically rich gold-company valuation multiples.
Mr. Munk would not comment on speculation that Barrick might recruit a Chinese partner for its Latin American projects, specifically Pascua-Lama. "You would have to ask John Thornton that," he said.
Mr. Munk is easing into his gentler new life on a high note, having seen Porto Montenegro go from wasteland to premier seaside development in less than a decade. He and his rich buddies, among them Russian oligarch Oleg Deripaska, Nathaniel Rothschild and Sandor Demjan, the billionaire Hungarian real estate magnate who developed the WestEnd City Center mall in Budapest with Mr. Munk, picked up the decrepit naval base for next to nothing.
The early years were rough. Rusty old submarines had to be removed from the site in Tivat, on Montenegro's glorious Bay of Kotor – the only fjord in the Mediterranean. Bombs had to be defused. A few of the first contractors claimed they were victims of local corruption. "We did not tolerate that kind of behaviour," said Oliver Corlette, Mr. Munk's point man on the naval base's overhaul into a glamorous marina and resort, with a five-star hotel, 228 luxury condos and 450 berths that can accommodate the world's longest yachts.
At first, Mr. Munk was public enemy No. 1 in Tivat. The navy yard workers who lost their jobs considered him a "foreign hustler," to use his words. "I was threatened physically," he said. "They spat on my taxi. Today they love what we've done. … This project will expand every aspect of tourism in Montenegro."
He says he and his co-investors felt they had taken the project as far as it could go and that it needed a long-term, wealthy investor with development experience to take it to the next level (the real estate side of Porto Montenegro, a kilometre-long strip, is just 25-per-cent developed). He says the investors "are very happy" with the sale price, which is not to say they made a big profit: A source says the investment team – Mr. Munk owned 52 per cent of the project – collectively put in about €150-million ($220-million) of equity into the project, not far short of the rumoured sales price.
Mr. Munk says journalists have been predicting his retirement for many years, "implying that I am just about dead." But he keeps going, albeit at a slower place. He will continue his charity work – with a special emphasis on the Peter Munk Cardiac Centre at Toronto General Hospital and the Munk School of Global Affairs at the University of Toronto – sell his share of the enormous WestEnd mall and divide his time mostly between Toronto and Lyford Cay, the exclusive gated community in the Bahamas where he recently bought a house.
Barrick will never be far from his mind – no matter how much or how little he does. "This is just the beginning for Barrick," he said. "My biggest thrill has been to see Barrick go back to where it belongs."