Peter Munk / Jewiki
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Reports circulating in the financial press suggest that in two days time, at the company’s board meeting on Wednesday December 2nd, Peter Munk, now 86, will finally be able to look forward to retiring from the Chairmanship of Barrick Gold Corp. The change will then be implemented at the company’s next Annual Shareholders Meeting in April, 2014. At the same board meeting current co-Chairman John Thornton will also be named as his successor as sole Chairman, again to become effective as of next April’s Annual Shareholders Meeting.
For more than thirty years Peter Munk has been in total charge of the company. During this time he completely changed its focus more than once; from eponymous hotel proprietor, to oil and gas exploration, and then finally to find huge success and become the world’s largest gold miner.
Along the way Peter Munk made huge amounts of money for his grateful public stockholders until, in this last down-cycle the company, and the stock, has gone through some extreme strains. The shares have lost over 40% of their market value in 2013 so far alone.
This has been partly due to overall mining industry, and gold-price, weakness with gold prices falling 25% so far this year alone.
It has also been due to some terrible planning, and then poor operational oversight, of new-mine development, leading up to the indefinite suspension of the company’s huge new Pascua Lama gold mine in South America on the Chilean – Argentine border.
Finally, Barrick has had to endure the consequences of an over-leveraged balance sheet to pay for some of its acquisitions, effectively made at precisely the wrong time in the business cycle including that of Placer Dome in 2006. This has brought about a resounding imperative for a massive cut-back now in capital expenditures.
With a newly minted US$3 billion equity issue just completed and deposited in the bank though, it is indeed perhaps the time for a fresh set of eyes to set the course for the company’s future therefore.
New CEO Jamie Sokalsky, who was promoted from CFO to President & CEO last year, will have his work cut out for him at the operating level, paring costs to the bone everywhere he can find in all their other projects.
John Thornton will be confirmed on Wednesday as the company’s choice to become new sole Chairman of the Board, effective as of the next Annual Shareholders Meeting. 59 years of age and currently co-Chairman he has spent the last year and a bit working his way into familiarity with the company and the job. It is a model case study in succession planning, really.
With strong connections to China it is said he will be well equipped to bring these relationships to bear on Barrick’s present needs, and future deals, including with China’s Sovereign Wealth Fund the China Investment Corp.
Barring major recoveries in the prices Barrick can obtain for its gold and its copper, cash must be obtained through selling off some of its surplus assets, arguably including maybe all of its copper assets, from joint venturing other projects and, lets face it, possibly from a further share sale as well at some point.
Nobody likes to dilute the stock, but discretion is by far the better part of valor here in such a capital intensive, and long range, business. Or, a merger with another entity with a stronger balance sheet could end up as the result too, though it is hard to say who might fit.
Thornton had a distinguished career as a financier at Goldman Sachs. He left Goldman in 2003 and went off to seek adventure in China, kick-starting while he was there a new business leadership programme at Tsinghua University in Beijing.
Crucially perhaps, Thornton is also a member of the China Investment Corp.’s International Advisory Board. He is also Chairman of the Board of Trustees of the Brookings Institution, where he was instrumental in setting up the John L. Thornton China Center.
If Thornton and Sokalsky succeed in being aggressive in turning the company around, at both the strategic and at the operational levels, all the current shareholder rumblings about executive pay and the independence of directors that have been bubbling just above the surface in recent months will fade back into the background, where they will then again belong.
When you are doing really well shareholders are only too happy to pay up. Thornton certainly has great credentials, now after this coming April we will see what he can really do.