The departure of a key executive from Barrick Gold Corp. highlights the large amount of capital rushing into a red-hot corner of the mining world.
Shaun Usmar, the highly regarded chief financial officer at Barrick, is leaving to head up a new venture backed by the U.S. hedge fund Elliott Management Corp. that will focus “on royalty, streaming and other forms of investments in the mining industry,” according to a Barrick press release issued after markets closed on Wednesday.
Elliott Management has earned a reputation for smart, aggressive investing and is fresh from a resounding victory in its 15-year battle over Argentine debt. The involvement of the high-profile hedge fund demonstrates the lush potential payoffs that a growing number of investors now see in providing cash-strapped miners with access to capital.
“Streaming” deals, in particular, have boomed in recent years. Under these agreements, companies provide miners with cash today in exchange for the right to buy a stream of metal tomorrow at a low, fixed cost.
Silver Wheaton Corp. of Vancouver pioneered the strategy more than a decade ago. Franco-Nevada Corp. and Royal Gold Inc. adopted the model and they have been joined by many others.
The newcomers range from upstarts such as Osisko Gold Royalties Ltd. and Sandstorm Gold Ltd. to private equity firms such as Orion Resource Partners and Blackstone Group. They have all demonstrated a willingness to provide miners with money at a time when banks and equity investors have turned skittish.
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