Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Canada’s Barrick Gold Corp would be open to taking over Newmont’s stake in its Nevada Gold Mines joint venture, CEO Mark Bristow said on Wednesday, after Newmont’s $16.9 billion bid for Newcrest ramped up pressure on gold miners to do deals.
Bristow though distanced himself from rival Newmont’s M&A push on Wednesday and highlighted Barrick’s plan to grow through exploration rather than acquisitions.
Shares of Barrick Gold were trading 4% down at the Toronto Stock Exchange.
“We can’t see much strategic benefit in just getting big for bigness sake, and we don’t agree with you that it builds a better company with more gravitas,” Bristow said in response to investors concerns about the potential challenge a bigger Newmont posed.
“In fact, I believe it probably adds more risk.”
However Barrick was interested in buying out Newmont’s share in its Nevada Gold Mines asset. The Newcrest acquisition by Newmont, if successful, could result in the enlarged company shedding some assets.
“I’ve always said that the best assets that we haven’t got are the other parts of our joint ventures,” Bristow told Reuters. “If there was a way of acquiring those assets I think we would be desirous of acquiring them.”
Barrick beat analysts’ estimates for quarterly profit and announced a share buyback of up to $1 billion after record payouts to shareholders last year.
Bristow stuck to the company’s ‘build, not buy’ approach and ruled out the possibility that Barrick would launch a counter bid for Newcrest.
Paying a premium means that the only way to make money is if gold or copper prices increase, said Bristow, adding that if the above variables do not occur, then companies have to add more value to those assets.
Newmont’s offer implied a 21% premium to Newcrest’s share price. This month Reuters reported that Newmont was open to sweetening its $16.9 billion bid for rival Newcrest.
Barrick last month reported a 13.4% rise in gold production as access to high-grade ore at its Cortez and Carlin mines in Nevada powered a “strong finish” to the fourth quarter. Earnings for the quarter came in at 13 cents per share, while analysts on average had expected 11 cents, according to Refinitiv IBES.
Production for the year, however, was 4.1 million ounces of gold, down from 4.4 million ounces in 2021.
Barrick’s all-in sustaining costs (AISC), an industry metric that reflects total expenses, rose to $1,242 per ounce of gold, a 28% increase from a year earlier. Its cost of producing copper jumped by 21%, to $3.18 per pound from $2.62 per pound.
Barrick expects costs to stabilize or lower slightly in 2023, forecasting costs of $1,170 to $1,250 per ounce of gold and between $2.95 and $3.25 per pound of copper.
The company returned a record $1.6 billion to shareholders in 2022 through dividends and buybacks.
On the operational side, seven Barrick workers have died on the job since 2022. Bristow admitted to these issues, calling it a personally “traumatic” time for him. “We did not invest enough time in knowing our contractors, and we need to ensure that we have an induction process in place so they understand our processes”, Bristow added.
(By Divya Rajagopal, Helen Reid and Arshreet Singh; Editing by Sriraj Kalluvila, Mike Harrison and Josie Kao)
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