Good morning everyone and thank you for joining us.
This will be a little bit unusual for me—I’m going to work off a script, so that it’s crystal clear what I want to get across, and we can hand it out to you later on if you don’t want to take notes.
This is our first investor day in five years. From now on we will have this day every other year or possibly even every year, depending on the circumstances, and whether or not you all are interested in it. This will be one of a number of steps we will take to be transparent and build trust with you.
Transparency is the currency of respect. It is a core feature of a company founded on a culture of partnership. As your partners and fellow owners, we will be straightforward and open with you, so that you understand and believe in the process by which we arrive at our decisions.
For example, one of the things we will be showing you today is the sensitivity of our significant mineral resource base to both higher and lower gold prices. We carried out this analysis not only to improve our own understanding of our resources, and allow for better planning—just as importantly, we wanted to provide you, our partners and fellow owners, with a clearer picture of our mineral endowment and how it is affected by changing gold price assumptions. We want you to have a very clear understanding of the options we have from our current assets.
A year ago, we told you we would bring Barrick “back to the future”—which meant we would recapture and make relevant the original, authentic DNA of this company as existed when Peter Munk and his partners created it. Specifically, the phrase referred to re-establishing four core strands: one, a partnership culture; two, a lean, nimble, decentralized business model; three, an intensive focus on creating long-term value as measured by cash flow per share; and four, financial rigor and prudence as evidenced by discerning portfolio management and a healthy balance sheet.
The best and most important news of the year—we did exactly what we said we would do.
We reduced our debt by $3 billion, nearly a quarter of our total debt.
We reduced our all-in sustaining costs from $864 to $831 per ounce.
We simplified our head office, eliminated management between it and the mines, and accelerated the pace at which information flows between them.
We pared down our portfolio, implemented a new system for allocating capital with strict investment criteria, and sold, canceled, or deferred several projects that did not meet those requirements.
I want to spend a few moments on our partnership culture and our renewal of talent.
As you know, we have intentionally eschewed the traditional hierarchical organizational model, in favor of our authentic partnership model. We believe that complex matters are better understood and managed by a team of partners working together, especially in assessing and reducing risk. Kelvin, as president, is, by definition, the primus inter pares within the partnership.
Five of our seven most senior partners have joined Barrick in the last fifteen months. We also identified truly outstanding talent within Barrick and made them partners—in particular, people with exceptional technical talent or a demonstrated ability to build relationships of trust with host governments and other partners.
At the Board level, we will be announcing two new non-executive directors in the upcoming Proxy. These are in addition to the two directors we recently appointed, Rob Prichard and Kelvin. As of the Proxy, assuming all directors are elected, eight of my fellow thirteen directors will have joined the Board since I became Chairman, and three of those eight have spent their entire careers in mining—taken together they have 115 years of experience in the industry. Those facts give you an indication of the scale and the pace at which we are attracting talent and building a first-class team.
All of our partners will, over time, become meaningful owners whose net worth is tied to the shares. It is our intention that, over time, every single person at Barrick will become a shareholder and owner.
We have also put in place a structure for governance and management that makes best use of our talent and ensures that your focus is our focus. The Board, as owners and as the voice of all owners, sets the company’s priorities in keeping with its purpose and values. It is then my job—as Chairman, as representative of the Board and the owners, and as a meaningful owner myself—to ensure that the partnership executes on those priorities to the highest possible standard.
I do this through a weekly meeting I chair of our seven most senior partners. We go around the table, one by one, and I monitor progress, clarify any confusion, and emphasize priorities. The discussion begins with our obsession with talent, engaging Darian Rich, and proceeds to an insistence on best-in-class with Richard Williams; portfolio optimization with Kevin Thomson; financial prudence and capital allocation with Shaun Usmar; and strategy and intellectual underpinning with Catherine Raw and her searing voice of the owner. I’d like to say about Catherine, you can take the woman out of BlackRock, but you can’t take BlackRock out of the woman—and that’s very good news for all of us in this room.
The discussion then proceeds to the strength of our partnerships, and ends with new or outstanding priorities with Kelvin and Kathy Sipos. These discussions are collective, open, spirited, and lengthy. On occasion, they are supplemented with other partners to address particular projects of concern or opportunity.
For instance, special discussions on cost-containment at Pascua-Lama, or a review of the detailed facts underlying a decision on whether to sell part or all of a specific asset, or a review of the details of how we are handling the management of a particularly sensitive relationship with any number of partners.
All of this continues in 2016. The approach I just outlined is how we will stay true to our original, authentic DNA—how we will ensure that the fundamental endures and never changes.
It is also helpful and healthy to cast our collective eye on the longer term future.
We start with one immutable truth—everything we do is focused on one goal: creating, in a responsible manner, value per share for our owners, as measured by cash flow per share.
In a minute, you will hear in some depth what one might call the base case for how we will achieve this over-arching objective. In itself, that base case is solid, impressive, and reassuring. It rests on two fundamental principles.
One is a profound understanding of and commitment to the idea that in the twenty-first century, our core business is building partnerships of depth and trust with host governments, local communities, NGOs, indigenous people, and others. At their invitation and with their support, we are permitted to take their minerals out of their ground, and in so doing create wealth for all.
Two of our recent appointments to the Board, Brian Greenspun and Mike Evans, were made in meaningful part because of their extensive experience building exactly these kinds of relationships. Also, one of the two new non-execs has similar world-class experience.
The other foundational principle of the base case is a relentless commitment to operational excellence, such that we will bring down our all-in sustaining costs to below $700 per ounce by the end of 2019.
However, we must and we will go beyond that base case. We will do so primarily in two ways.
One, we will, over time, prove to you that we are not only discerning sellers—as we began to demonstrate this past year with the sale of various interests in seven of our assets, accomplished, as we all know, in difficult markets. We will demonstrate that we are also discerning buyers, capable of consistently creating per share value for our owners.
Two, we will also, over time, transform Barrick into a mining company for this century by reconceptualizing the essence of how one builds value in the industry.
We have already intentionally chosen a model that is different from our peers. I am reminded of John Templeton’s admonition, “If you want superior performance, you must be different.”
We agree. It is who we are and who we were—until we lost our way in recent years. It is in Barrick’s authentic DNA.
We will embody that DNA in a way that is all the more relevant by making the best use of technology and data, embedding it into our every fiber. It will make us better, it will make us faster—and it will make us safer. We will do this carefully, deliberately, and with an uncompromising eye on return on invested capital. But we will do it.
In the end, we want to be among the very best twenty-first century companies, not just in our industry, but in any industry.
In the fullness of time, we believe Barrick will be both the lowest-risk investment of its kind and the one creating the most value.
The gold mining sector has yet to drag itself out of the last century, and at Barrick we are restless. We will be a twenty-first century mining company—one creating value for all owners, with conviction and the courage to be different.
As Kelvin indicated earlier, I will be happy to take your questions when we get to the end of this section, or at any time over the course of the day—feel free to pull me aside.
And thank you very much for listening.