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A floor of empty cubicles is what’s left of Barrick Gold Corp.’s boom years. A lone whiteboard leans against a chair, the last vestige of hundreds of people who worked at the miner’s Toronto headquarters when gold was hurtling toward $1,900 an ounce (all currency in U.S. dollars unless otherwise noted).
The world’s biggest gold producer—one of Canada’s few global champions and formerly the envy of the mining industry—is on a desperate mission to recapture its magic after years of dismal results, humiliating missteps and rock-bottom investor confidence. Its share price on the NYSE is not much higher than where it was two decades ago.
The three-year slump in bullion prices to around $1,200 an ounce has devastated the industry. Mines that used to be profitable are now bleeding cash. In these conditions, Barrick’s every blunder—an ill-timed foray into copper, an attempt to build a mountaintop mine in the Andes—is exposed on its balance sheet, particularly in one remarkable number: Debt stands at $13 billion.
The company is vowing to cut that figure by at least $3 billion by the end of this year, even if it has to sell an heirloom or two to get there. A slew of top-rank Barrick veterans are gone and the company’s charismatic founder, Peter Munk, retired as chairman in April, 2014.
John Thornton, who was elevated from co-chairman to chairman when Munk retired, says he wants Barrick to “go back to the future,” to be true to its “original DNA”: lean, nimble and entrepreneurial. But how do you unwind history?
In the 1980s, Goldstrike was a mine that had a great name and a modest output—50,000 ounces a year, eked out from the Carlin Trend, a barren 60-kilometre-long stretch in northern Nevada where gold was first discovered by Newmont Mining Corp. But Goldstrike had been passed over by Newmont, even though combining Goldstrike with its nearby properties would have made for economies of scale. Other miners also passed.
Barrick’s stature at the time was just as slight as Goldstrike’s—a no-name in an industry dominated by South African giants like Harmony Gold, Gold Fields and Anglo American.
Munk thought Barrick should be in the Carlin Trend. He sent his friend and closest adviser, Bob Smith, to check out Goldstrike. Smith, who was also Barrick’s president and top miner, believed there was more gold there than had been estimated. On his advice, Barrick bought Goldstrike for $62 million in 1986.
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