At KPMG’s 16th Annual Mining Executive and Director Forum held virtually on Jan. 19., we interviewed Barrick Gold Corp. CEO Mark Bristow on his company’s approach to delivering value and his views on industry consolidation and company diversification.
While some investors measure value by market capitalization, Barrick Gold Corp. CEO Mark Bristow believes in a much broader definition that includes delivering economic benefits to all stakeholders.
The Toronto-based company — with gold and copper mining operations and projects in 13 countries across North and South America, Africa, Papua New Guinea and Saudi Arabia — has a stated mission to be “the world’s most valued gold mining business by finding, developing, and owning the best assets, with the best people, to deliver sustainable returns for our owners and partners.”
In the interview with KPMG Canada’s mining leader, Lee Hodgkinson, Bristow said, “being the most valued company means people want to invest in you, people want to work in your organization and host countries want you there in their country to operate in partnership to deliver value.”
“Sure, we don’t always get it right,” he said, “But you should be focused on working to achieve that goal… The mining industry has to embrace that vision if we are going to become relevant in the future as an investible industry.”
Being the most valued company means people want to invest in you, people want to work in your organization and host countries want you there in their country to operate in partnership to deliver value…the mining industry has to embrace that vision if we are going to become relevant in the future as an investible industry
Value through consolidation
Bristow sees consolidation and diversification as key for the company — and the mining industry — to provide economic benefits to stakeholders and deliver long-term value.
“It’s all about quality,” said Bristow, who became head of Barrick in 2019, after the company merged with Randgold Resources, an African-focused company he founded and built into a major gold producer.
“If you want to be world-class, you need to be global. And to be global, you have to operate in different cultures under different circumstances. And, you’ve got to have a broad enough human asset resource to be able to work in those countries with host country skills. That drives that concept of consolidation.”
Bristow cited the Barrick-Randgold merger as a great example of consolidation that brings together quality assets to form a stronger company.
“You put the collection of better assets under better management,” he said. “I used to always say, ‘We have too many assets under the hands of too many managers [in the industry].’ By that very definition, you end up with managers that aren’t effective in a global business.”
Today’s high gold prices, and in turn higher asset valuations, has many companies holding off on mergers and acquisitions. “To consolidate in a high gold price environment requires some real effort to be able to deliver value for both sides of the transaction — and we have certainly found that,” Bristow said. “We have to be very careful we don’t end up overpaying for assets at this phase of the gold cycle.”
Gold miners should also be open to diversifying into related base metals, specifically copper, to drive value, he said.
“If you want to continue to grow and produce gold as a world class gold company you will, in the future, be forced to invest in porphyry gold-copper assets because that’s where a large percentage of the future gold reserves will come from,” Bristow said, noting that many of the world’s discovered pure-gold deposits have been depleted.
Bristow also describes copper as a “very strategic metal,” since it comes with gold deposits, is easy to mine and has the same metallurgical characteristics, “so there is no additional skill required to produce copper.”
Copper is also countercyclical to gold as a commodity, so adding more helps to diversify a company’s asset base.
“If you’re really focused on creating value for all of your stakeholders, on a sustainably profitable basis, it makes sense for a gold company to explore world-class copper assets ,” he said.
“My view is that the whole industry — whether it’s gold, diversified or bulk — needs a reinvention if we are going to be miners of the future. Gold miners today have a leadership role in the market and we should be using that. My only thought is, ‘is whatever I do adding more value for my owners and other stakeholders, or not?’”
The value of advancing ESG performance
Creating value also means continuously improving environmental, social and governance (ESG) performance, Bristow said, especially as it becomes a key investment criterion.
“We’ve been doing ESG for 40 years, but there’s always room to improve,” he said.
Barrick’s specific sustainability vision is to create long-term value for all of its stakeholders and embed ESG and economic considerations into its business decisions.
Bristow believes sustainability is mandatory not just for the company and its existing stakeholders but also for the industry to attract a broader range of investors, particularly a more “generalist” investor and those from the younger generations.
“We need to be more relevant,” he said. “To survive, you have to be acceptable to future generations… We’re a speculator industry that, in this modern world, does offer and demand highly skilled people and we pay for it [by offering above-average salaries].”
Barrick has set several ESG targets, including reducing its greenhouse gas emissions by 10 per cent by 2030, alongside other programs and initiatives. While some of its goals may not be as aggressive as a few of its mining peers, Bristow believes Barrick’s are more realistic and pragmatic.
“I just believe in reality,” he said. “There’s a lot of work to be done if we’re going to be responsible. My point of view is that — if you don’t have a proper plan — and we all promise to do this and to do that, and we don’t deliver it, we’re going to be in a really bad place… Barrick’s view is, want to be fully transparent.”
Added Bristow: “I like to do what I say.”
Part of the company’s ESG commitments include developing the next generation of mining industry employees and leaders. It’s why Bristow said Barrick has a kept up its student internships and development programs during the pandemic, as just one example.
“My concern is the world will end up with a one year or 18-month hole in its march for progress and we’re going to have a generation that has missed out and is scrambling to catch up,” he said. “We have consciously tried to make sure that gap isn’t allowed to develop within the Barrick organization.”
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