As a new co-chairman shares Chairman Peter Munk’s workload, employees and shareholders may finally have to concede that Barrick Gold’s patriarch can’t manage the world’s top gold miner forever.
RENO (MINEWEB) – While Barrick’s ouster of CEO Aaron Regent Wednesday grabbed the lion’s share of the news headlines, the decision of 84-year-old Peter Munk, the co-founder and chairman of Barrick, to appoint a co-chairman may actually have the longer-term ramifications for the world’s top gold miner.
Over the years, Munk has been a stickler for share price performance. And, perhaps, a warning of what was on the cards for Regent occurred last month when Munk told shareholders at the Barrick’s annual meeting that the company’s share price was not satisfactory.
In 2003, Munk ousted then-CEO Randall Oliphant as a Barrick news release said, “The board made the change to address its concerns over the company’s recent performance…”
In a news release publicizing Regent’s ouster, Munk once again stressed, “We are fully committed to maximizing shareholder value, but have been disappointed with our share price performance.”
In an AP interview, however, Citi analyst Brian Yu observed that while Barrick’s stock was down 7% this year, it still performed better than other major North American gold producers although Barrick shares have lost 28% from their 12-month high in September 2011.
Forbes noted, “Barrick’s stock price gained nearly 30% under Regent’s tenure, failing to keep up with the 49% raise in the price of bullion, despite performing in line with its pears.”
In a note to clients Wednesday, analyst George Topping of Stifel Nicolaus advised, “Barrick’s performance has been relatively better than its peers.”
In an e-mail Wednesday to Mineweb, however, analyst John Tumazos of John Tumazos Very Independent Research suggested “certainly the market valuation of ABX has discounted its outlook. ABX trades at about a 25% discount to estimated NPV, and most gold stocks trade at a 25% or more premium.”
In his analysis, Topping also referred to concerns about the rising costs of the $5 billion Pascua Lama Project.
In March the U.S. Export-Import Bank and Export Development Canada both de-listed Pascua-Lama from their projects under consideration for funding. Last summer cost estimates for Pascua-Lama soared from the previous estimate of US$3.3 billion to $3.6 billion to a new high of $4.7 billion to $5 billion.
By May of this year Barrick COO Peter Kniver announced his retirement, followed by this month’s ouster of Regent.
Topping suggested Regent may be a “‘fall guy’ for the disastrous Equinox Minerals (copper in Africa) acquisition in April 2011, for which we believe Barrick overpaid by 50% in a $7.5bn deal that even beat out a Chinese parastatal.”
“The acquisition was supported by the chairman and the board at the same time,” Topping observed. “It may also suggest that the Equinox assets are worse than expected, or that the $5bln Pascua Lama development has issues and, therefore, a head must roll.”
“It also confirms Peter Munk still holds the power in the company,” he advised.
Tumazos told Mineweb, “Peter Munk was born November 8, 1927. God bless his longevity, but the appointment of such as distinguished co-chairman appears only prudent at age 84 ½.”
John L. Thornton, formerly a Barrick director, is now co-chairman of Barrick’s board. “John’s knowledge and experience of global business affairs are truly exceptional and we are all fortunate that he has agreed to take on this important role,” Munk declared in a news release.
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