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After serving as Barrick’s Chief Financial Officer for more than 13 years, Jamie Sokalsky was appointed President and CEO in June 2012. He quickly set the company on a new course that stresses disciplined capital allocation. At the same time, he has indicated Barrick remains steadfast in its commitment to corporate social responsibility (CSR) and sharing the benefits of mining with host communities. In a wide-ranging interview, Sokalsky talked about his new role and CSR at Barrick.
How are you enjoying your new role as CEO?
Very much. I’m proud to be the CEO of a company that’s an icon in Canada and a world leader in its industry. I’ve been with this company a long time and I know what great assets, people, and opportunities we have. Our goal is to set the bar in terms of responsible mining, where we consistently hit our financial targets while operating in a way that provides benefits to the communities where we operate. It’s exciting, and we have a great future head of us.
You have been with Barrick since its early days. In your view, is it the same company today?
I think the fundamental values of the company are very similar, even though we have grown and evolved and are a much more global company today. The ethics of the company — and the desire for people to conduct themselves with honesty and integrity — have always been there. I’d say the desire to do things the right way has been in Barrick’s DNA since the founding of the company by Peter Munk. Those fundamental core values remain the same.
The financial strategy you have laid out as CEO is one of disciplined capital allocation. Your message is that returns will drive production, rather than production driving returns. Will we be seeing major cost containment in terms of community and environmental investments?
When we talk about disciplined capital allocation it doesn’t mean that we should look to just reduce costs or make less investments. It means making the right investments and allocating capital in a disciplined way.
While I’m sure we can do things more efficiently and effectively throughout the company in different areas, there are critical areas where we cannot cut corners or take shortcuts. Here I mean our partnerships with local communities and promises to our stakeholders, as well as our commitment to protect the environment. In fact, these areas may require further investment. By doing so, we can significantly increase our returns overall because doing the right things for the community and the environment is also good business.
What is the connection between responsible mining practices and the company’s rate of returns?
If we run our business in the best possible way — in partnership with local communities and our stakeholders — our returns should be even higher. So disciplined capital allocation is about focusing on returns and free cash flow, but we can’t be penny-wise and pound-foolish. Investments that protect our license to operate are critical to earning returns on our investments and protecting our reputation. This is very important in terms of the cost of capital and our share price, which allows us to make further investments and, ultimately, do an even better job for our stakeholders.
Over the past five years, Barrick has placed significant emphasis on strengthening its CSR practices. How far do you think we’ve come?
I’ve been pleased to see how much we have strengthened and improved our approach to CSR over the years. Through a range of partnerships, we are contributing to health care, education, law and order and other critical aspects of daily life in local communities.
At the same time, we have worked hard to develop strong internal systems in areas like security, human rights, community relations, the environment and safety.
That’s not to say we haven’t had challenges over the years. We have. But we’ve faced up to them and dealt with them in a transparent way. We accepted ownership and implemented strategies to deal with them.
We operate in so many diverse countries and cultures today. We’ve had to sharpen our focus in certain areas so that we continue to demonstrate our values across Barrick. But I’m proud of the way we pulled together to deal with the complex challenges we’ve faced. There’s always room for improvement, but I do feel we have the commitment, the people, the culture and the DNA to continue to learn and make further improvements.
In terms of company culture, is there an area that you’ve been focusing on?
I think just about everyone in the company understands the importance of operating ethically, all the time. It’s part of the company’s core values and something we can’t emphasize enough.
I want to make sure we empower employees to speak up about problems — to talk about the bad news, not just the good news — and make sure that everything is brought to the attention of the appropriate people. I’ve been consistently voicing that message since I took over this job. A culture of open and honest communication is essential, because if we don’t know about the challenges and the problems in the company, we can’t work together to resolve them.
What do you see as some of the company’s more notable community programs?
There are so many things, it’s hard to narrow it down. When I visit schools we support in places like Zambia or Tanzania, I see young children that are so happy to be in a classroom, even if it’s very basic and crowded. Well, that really sticks with me.
The thousands of scholarships we’ve been providing to advance education in many regions of the world — including the children of our employees — is something close to my heart. It’s extremely important to me.
There’s also health care. I’ve visited some of the clinics that we help to fund that provide education and health care for expectant mothers — our partnership to improve the health of mothers and children with World Vision [in Peru] for example.
I feel very proud knowing we have a small part in helping to improve the lives of people in the communities in which we operate.
I also strongly support our work with global experts and organizations to improve human rights, particularly initiatives for women, to try to improve their situation overall.
How do you perceive Barrick’s environmental performance?
Respecting the environment has always been extremely important but it’s more important than ever. At Pueblo Viejo in the Dominican Republic, we inherited a vast amount of environmental damage from a former operation and are conducting the largest environmental clean-up in the country’s history. We are also funding the clean-up outside our mining area, which we voluntarily agreed to do.
Overall, I’m proud of our environmental record and that’s just one example. I see sites that are 50 to 100 years old and the investment that we make to return the environment back to as close an original state or something that’s actually better. I’ve seen that at so many sites, particularly in the U.S.
These investments are incredibly important and need to continue. It is something that I fully support as CEO.
You have said that your number one priority is the construction of Pascua-Lama, the world’s first bi-national mining project (Chile/Argentina). How important is having a license to operate?
Pascua-Lama will be one of the great gold mines in the world. We’ve been focused on cost and schedule, but it’s not just about the dollars and the time to complete the project. It’s also about doing the right things to maintain our license to operate, because the costs will be higher if we don’t. So maintaining our license to operate there is extremely important.
Environmental performance is a huge part of this. The reality is that any major environmental incident or compliance failure would have an enormous financial cost and consequences for any company. That also goes to our rate of return and our ability to earn money for our stakeholders and do the right things. Noncompliance on environmental aspects is never acceptable. Global implementation of Barrick’s Environmental Management System has translated into better performance, which is really key.
Barrick was named to the Dow Jones Sustainability Index for the fifth year running. Is this important to you as CEO?
Yes, it’s very important and it says a few things to me: it says that we are on the right track. It also says that we have some extremely good people working in the company that are being recognized by these reputable institutions. I want to congratulate them for working so hard to allow us to achieve these leadership rankings.
There are many socially responsible investors with funds that consider this important as well. We are in the business of shareholder value and if we can attract more investors that are focused on these types of metrics that’s a huge win for Barrick.
Ultimately, this kind of recognition is a calling card for us in other countries and can give us a competitive advantage for a new mine or exploration. So it helps us advance our business interests as well.
In the Dominican Republic, the Pueblo Viejo project is coming into production on budget and on schedule. This $3.8 billion project is a big part of the company’s future and the economy of the D.R. What is your reaction to recent protests over jobs?
Well, I was saddened to see that. Whenever there’s a social conflict, it’s a concern and we need to make sure that we address it right away and start a peaceful dialogue to find common ground.
With Pueblo Viejo specifically, we just completed a huge construction project. There has been a transition from construction employees to operating employees. It takes more people to build a mine than to operate it, so unfortunately we’ve had to reduce the work force by several thousand.
We have done a number of things to mitigate the impact of this transition, like providing training and maximizing local employment, and, where we can, providing employment to workers we’ve had to demobilize. Dialogue is key to address issues and ensure the communities where social conflicts are occurring recognize the economic and social benefits of that project. It’s not just about the jobs at the project, although they are important, but about the indirect economic value that the mine provides to the broader community as a whole.
We need to demonstrate how we’re sharing the benefits beyond our employees, to suppliers and contractors and the region as a whole. Pueblo Viejo is the largest single investment ever made in the Dominican Republic. We just need to make sure that the benefits of that investment cascade to as many people as possible because we’re all partners in the operation.
You have two grown daughters. Do they raise issues about the company and corporate citizenship?
Our two daughters certainly follow the company. They have their Google alerts, although now that I’m CEO, it’s higher profile. They both have strong feelings about making sure we do the right things as a company. In fact, my older daughter worked for a summer in Chile and Argentina in community development and had a first-hand look at the early days of Veladero and Pascua-Lama. It had a big influence on her interests. Although I know what we need to do, I have young people at home who belong to a generation with a much higher level of social awareness. They know first-hand the influence of social media, so they’re a positive influence and a good sounding board. They keep me grounded and they keep me balanced.
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