Weekly Nugget

Buy, Build or Discover? Barrick’s Bristow Cools on Deals

Barrick's Mark Bristow built his reputation on mining deals, but at the recent MINExpo conference in Las Vegas he said his focus is on building new mines.

Barrick Gold Corp.’s (TSX: ABX) Chief Executive Mark Bristow built his reputation and his current job on mining deals, but at the recent MINExpo conference in Las Vegas, he said he is focusing on new mines to boost profit

He stated Barrick would strike a deal should an appealing one present itself, which he described as a mine that can produce 500,000 ounces of gold annually with a long mine life and be profitable at gold prices of $1,200 an ounce. But he stressed that acquisitions would not be the primary strategy for growth. 

He stated that Barrick has no interest in nickel, lithium, or other metals used to make electric vehicles and will deepen its focus on copper and gold.

As a sign that his deal interest may be waning, Bristow said he has no interest in buying a stake in Zambia's Mopani Copper Mines. This is just one example of many potential deals he did not pursue.  

More than a year ago, when the price of copper was in the USD$2-3 per pound range, Mr. Bristow openly considered a friendly deal with Freeport-McMoRan and Newmont Mining, only for these deals not to go forward because of the rapidly improving price of copper during this time.

The last time Barrick made a big deal, it bought Randgold Resources in 2018 for US$6 billion, run by Mr. Bristow. 

However, Bristow's declaration at the mining conference carries on his long-standing criticism of the gold industry and its deal-making. In an interview with Creamer Media, he stated: 

“In the last bull market, everyone threw money at anything, like we’re seeing now, and some juniors tended wrongly to secure old, previously uneconomic assets. Today the industry is not making considered decisions and what frustrates me is that some fund managers are obsessed with short-termism.”

Bristow believes Barrick lost its way through a couple of badly timed deals during the last bull market. But before that, Barrick was built on significant brown and greenfield exploration, as was his own company Randgold Resources.

This criticism appears to be turning into a strategy. 

Bristow sees expansion as critical and Barrick has been re-considering its own portfolio of assets in order to abate his fears of diminishing reserves. Barrick plans to invest in itself, “I’ve got 10 years of runway ahead of me,” Mr. Bristow said of his company’s reserves and goals in a 2021 Globe and Mail article. 

As of December 31, 2020, Barrick’s proven and probable reserves were 68 million ounces of gold and 13 billion pounds of copper. 

In August, Barrick  Barrick agreed to independent government-led oversight of the environmental and social impact assessment studies for the new tailings storage facility at its Pueblo Viejo gold mine (6.2 million ounces of gold in Proven and Probable reserves) in the Dominican Republic. 

This facility is part of a USD$1.3-billion expansion project to extend the life of the mine beyond 2021 and possibly beyond 2040, supporting annual production in excess of 800,000 ounces.

In April, the Papua New Guinea government reversed its efforts to stop Barrick and Chinese partner Zijin Mining from running the Porgera gold mine (2.4 million ounces of gold in Proven and Probable reserves). The government opted instead to renew its partnership with the companies and end its legal dispute with them.

Barrick and Novagold plan to work towards a feasibility study for the Donlin gold (33.8 million ounces gold in probable reserves) mine in Alaska. The companies are working on securing the final state permits needed to develop an operation. 

While these projects move closer to a construction or production decision, Barrick has been investing into grassroots exploration. 

“We’re comfortable replacing ounces but you’ve got to look at the next big one.” - Mark Bristow, Creamer Media

The company currently has prospective new properties in Tanzania, Egypt, Guyana, Japan and Nevada, recently optioned Kenorland Minerals’ Uchi Project in Canada while its JV with Newmont, Nevada Gold Mines signed an earn-in agreement with Nevada-based Ridgeline Minerals.

Barrick is a different company from when Bristow took the lead, and by all appearances he seems determined not to make the mistakes of the past and invest in greenfield exploration. Time will tell. 

"Organic growth is always a winner when it comes to value." - Mark Bristow, Creamer Media

Barrick Gold has 9 technical reports on Prospector. 

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