Barrick Gold CEO Mark Bristow in his Toronto office on Feb. 12, 2020.Melissa Tait/The Globe and Mail
Barrick Gold Corp.’s ABX-T CEO Mark Bristow says he has no interest in buying either Yamana Gold Inc. YRI-T or Gold Fields Ltd. GFI-N if the multibillion-dollar deal between the two gold companies falls apart, but he is mum on the prospect of taking another run at Newmont Corp., Barrick’s bigger global competitor.
South Africa’s Gold Fields is attempting to buy Canada’s Yamana Gold for US$6.7-billion, but the success of the deal hangs in the balance with two of Gold Field’s major shareholders opposed, and Gold Field’s shares under pressure.
Yamana in its circular a few weeks ago, said that it had engaged in M&A talks with five other miners, before entering exclusive talks with Gold Fields. The Globe and Mail reported that one of Yamana’s suitors was Agnico Eagle Mines Ltd., which initially explored buying the whole of Yamana, but ultimately decided it wanted to only buy one of its mines, a scenario that did not appeal to the Toronto-based gold company.
Yamana shares have has outperformed those of almost every other gold mining peer this year, in part because of the 42-per-cent premium that Gold Fields is offering. If the deal with Gold Fields is not successful, analysts expect its shares to tumble potentially giving an opportunist buyer a window to get the company at a discount.
Barrick’s Mr. Bristow said in an interview that there is no chance that he will buy Yamana, or Gold Fields, because neither company meets Barrick’s performance criteria, which demand that its mines be both huge producers and low-cost.
Shares of Toronto-based Barrick, the world’s second most valuable miner, are down 25 per cent this year. But Barrick is bearing up better than most of its peers in a difficult gold market, with bullion down by more than a fifth, since hitting a record high in 2020.
Barrick shares have also soundly outperformed Newmont’s this year, and it trails its Colorado-based peer by only US$6-billion in market value. Barrick has tried to merge with Newmont on several occasions, most recently in 2019. When asked, given the relatively small differential in value between both companies, if Barrick might attempt a reverse takeover of Newmont, with Mr. Bristow taking over the combined company as CEO, Mr. Bristow replied, “It’s very kind of you to polish up my ego, but what do you want me to say?” When asked the same question again, he replied “No comment.”
Barrick on Thursday warned that its costs are set to climb again, even after its all-in sustaining costs (AISC) rose by nearly 23 per cent year-over-year. AISC incorporates almost all of the costs associated with mining, and recently rapidly rising fuel prices has been a major factor in the inflation Barrick is grappling with. Despite the pressure on costs, Mr. Bristow said that none of the company’s big development projects, which will entail significant capital expenditure over the next few years, are in jeopardy. Those include an expansion at its Pueblo Viejo mine in the Dominican Republic, and a longer-term commitment to build a massive copper and gold mine in Pakistan.
By comparison, Newmont recently delayed making a funding decision on a planned expansion of one of its large gold mines in Peru, owing to uncertainty over costs.
Newmont, unlike Barrick, pays a fixed quarterly dividend, a feature that potentially limits some of its ability to spend its cashflow on projects, but it’s a strategy that has been mostly been welcomed by its major investors. Barrick’s decision not to pay a fixed dividend, and instead pay a performance-based dividend, has caused tension with some fund managers who crave a dependable payout. But Mr. Bristow defended Barrick’s dividend strategy on Thursday in a call with investors, saying it is elemental to his growth plans. He also decried others in the industry who are paying out more in dividends than they are bringing in in cash flow. “That’s crazy.” he said.