Peter Munk built Barrick Gold Corp. (ABX) into the world’s largest gold producer by expanding into Africa and South America. Now former Goldman Sachs Group Inc. President John Thornton is betting on China to help revive the beleaguered company’s fortunes.
At a Dec. 4 board meeting, Thornton will be confirmed as Barrick’s next chairman, succeeding Munk, 86, who plans to retire at the Toronto-based company’s next annual shareholders meeting after three decades, according to people familiar with the situation.
Thornton, 59, currently co-chairman, already helps to oversee long-term corporate strategy. As part of that remit, he’s trying to establish partnerships with Chinese companies that may include investment in Barrick and future mining projects, said the people, who asked not to be identified discussing a private matter. China Investment Corp., the country’s largest sovereign wealth fund, is among potential partners Barrick has met with, the people said.
The leadership change at Barrick comes at the end of a difficult year for the company. It has lost 41 percent of its market value in 2013 while debt levels have soared after a slump in gold prices, rising operating expenses and a cost blowout at an $8.5 billion mining project in the Andes.
“Barrick needs to do whatever it can to get its debt paid down,” said Rick de los Reyes, who manages about $1.1 billion at T. Rowe Price Group Inc. in Baltimore. “That balance sheet is going to be a really big problem.”
Barrick has already taken steps this year to cut costs and improve its balance sheet. It raised $3 billion in a share sale last month, using some of the proceeds to repurchase bonds. Jamie Sokalsky, who started as chief executive officer in June 2012, has sold less-profitable gold mines and the company’s energy arm and put other operations under review.
“They have way too many assets and many of them are legacy assets,” Adam Graf, an analyst at Cowen Securities LLC in New York, said in an interview. “They should dispose of those assets and redeploy that capital.”
With Thornton as chairman, there may be more changes ahead. A Wall Street banker without a mining background, he was behind a decision last year to bring in management consultant McKinsey & Co. to help evaluate Barrick’s strategy, according to the people familiar with the situation. While he sees Barrick’s top priority as remaining the leading gold producer, he’s open to a rethink of the entire business, which may involve acquiring mining assets in other commodities, such as copper, they said.
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