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John Thornton admits it: building relationships with Barrick Gold Corp.’s shareholders did not go as smoothly as he planned this year. “I can think of better ways to start,” he quipped in a wide-ranging interview at the Toronto-based miner’s head office on Thursday.
But controversies over pay are the least of his problems now. As Barrick’s next chairman, he becomes leader of a company with falling production, excess debt, a stock price near a 20-year-low, and retained earnings of minus US$4.7-billion to show for its 30-year history.
Turning around this company will be a massive feat, especially given that the falling gold price is putting serious strain on Barrick’s cash flow.
Mr. Thornton, like his predecessor Peter Munk, believes that forming Asian partnerships is key to overcoming Barrick’s challenges and ensuring its future growth. But even he acknowledged that potential partners will have reservations about Barrick after seeing how badly the company screwed up the now-idled Pascua-Lama project.
“That scepticism will certainly be there. That’s our hurdle,” he said, adding that Barrick has no more margin for error when it comes to its execution.
His plan to get the company on track begins with getting all the operations in order and running well. After that, he sees Barrick going back on the offensive and finding ways to grow, a word rarely heard among senior gold miners these days. He reiterated his belief in diversification away from gold, saying it does not make sense to build a company that produces one commodity and is subject to fluctuations in the price.
“You’re on a high wire act with no net below you,” he said.
Debt will continue to hold Barrick back. Mr. Thornton vowed to keep looking at ways to fix up the balance sheet, but it won’t be easy given the weak gold price and the fact that the company just tapped the capital markets for US$3-billion and is in no position to do so again.
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