Peter Munk’s lament: Barrick’s spiral started with formation of gold ETF – by Peter Koven (National Post – December 7, 2013)

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Peter Munk admits it: he is not handing over his pride and joy in the best of condition. “If I were to [look at it] as a photograph, a snapshot in the moment of time, I would be unhappy,” he said in a detailed interview in his office this week.

If he’s in the dumps, there’s good reason. This last year has been one of the worst in the history of Barrick Gold Corp., and plenty of the damage was self-inflicted. Fixing up the company during a bear market for gold will be a major challenge for John Thornton, his handpicked successor.

Mr. Munk, 86, announced his retirement from Barrick on Wednesday. The lifelong entrepreneur will finally step aside next spring, paving the way for Mr. Thornton to put his China-influenced stamp on the company.

Mr. Munk’s accomplishments at Barrick are too lengthy to list. In three decades, he took a company that started with US$20-million in the bank and built the world’s biggest gold producer, acquiring several industry stalwarts along the way and beating the Oppenheimers at their own game. Mr. Munk had the time of his life as he built Barrick into a powerhouse.

“No one grew like us and no one [else] did 14 acquisitions, from Sutton to Lac to Homestake to Placer Dome, one after the other,” he said.

But for investors, the ride has not been nearly so fun. Barrick’s share price is significantly lower than it was 20 years ago, when gold was worth less than a third of what it is today. Recently, the company shot itself in the foot with a couple of severe missteps: loading up on debt to overpay for Equinox Minerals Ltd., and screwing up the Pascua-Lama project about as badly as any mining company has ever screwed up a major project.

Those errors have done serious damage to the company’s credibility. While no one at Barrick would admit it, the simple fact is that it is no longer viewed as the world’s flagship gold mining company. That honour now belongs to Canadian rival Goldcorp Inc.

Mr. Munk is open and honest about his mistakes: he refers to Pascua-Lama, for instance, as an “absolute, clear disaster.” But to him, the biggest reason that the share prices of Barrick and other gold miners have underperformed dates back almost a decade. And it has to do with a product he helped create.

In late 2004, the flagship gold exchange-traded fund was launched on the New York Stock Exchange (ticker symbol GLD). It took millions of dollars and years of lobbying by the gold industry to get the U.S. Securities and Exchange Commission to approve this product.

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