(Reuters) – Barrick Gold Corp investors have taken in stride news that the world’s largest gold producer may consider hedging its gold exposure, but they are roundly panning its plan for more diversification into other commodities.
John Thornton, who was confirmed after markets closed on Wednesday as Barrick’s next chairman, told reporters he would consider revisiting a hedging strategy for selling the company’s output because of the volatility of gold prices.
He also said he thinks Barrick, which already has a copper sideline, is well placed to look more at copper and perhaps at other commodities, once it puts its recent troubles behind it.
That pronouncement stung some Barrick shareholders, many of whom are invested in the Toronto-based miner only because they see a bright future for the gold price.
“It’s like saying to the market, once I recover from all the bad decisions I have made and paid back the mountains of debt I incurred doing it, I am going to go out and do it all over again, but not in the commodity I’m in right now,” said John O’Connell, the head of wealth management firm Davis Rea Ltd.
Barrick’s share price is stuck near 21-year lows, hurt by a drop in the price of gold and investor disappointment with governance and corporate missteps that include ballooning costs at its now mothballed Pascua-Lama gold project in the South American Andes and its pricey takeover of Africa-focused copper miner Equinox in 2011.
“We are distinctly positioned over the next decade or two, if we can execute, to take what’s been built and not only extend it as the world’s leading gold miner, but also to take a very serious look at copper, which we are in and possibly minerals beyond that too,” Thornton said on Wednesday after Barrick announced a major boardroom shuffle.
Thornton’s vision dovetails with that of Barrick’s founder and long-time chairman, Peter Munk, who has faced bitter criticism for the C$7.3 billion ($6.9 billion) Equinox deal and other missteps.
Munk has long harbored an ambition to see Barrick become a big diversified miner in the mold of Rio Tinto Ltd or BHP Billiton Ltd.
Barrick said on Wednesday that Munk, 86, and two other long-term directors, will step down from the board this spring, when Thornton will take over as chairman. Barrick also nominated four new independent directors.
Thornton’s remarks on diversification struck a sour note with Christopher Mancini, an analyst at the Gabelli Gold Fund, which owns about 2.86 million Barrick shares.
“The comments overall are disconcerting,” he said. “I would say that Barrick has too many mines already. The company needs to get smaller and less complex, not more so.”
Barrick declined to comment. Its shares fell 2 percent to C$16.39 on the Toronto Stock Exchange on Thursday as the price of gold slipped.
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