Mark Bristow, Barrick Gold Corp. ’s chief executive officer, is ruing a lost opportunity to buy a large United States copper miner at a bargain basement price, and is now opening the door to a merger with great rival Newmont Corp .
Just more than a year ago, when the price of copper was in the pits, Mr. Bristow openly pondered a friendly deal with Freeport-McMoRan Inc. Had the transaction happened, Mr. Bristow may well have been hailed as a genius, because in the interim Freeport’s shares have gone up nearly fourfold. Copper this year has marched to a near record high thanks in part to rebounding demand in China, and speculative demand from traders.
Freeport made it clear it wasn’t interested in any kind of deal with Barrick, and with Freeport’s market value far outpacing Barrick’s, a takeover attempt by the Canadian miner is out of the question. During a conference call with analysts on Wednesday, Mr. Bristow acknowledged the Freeport ship had sailed, and hinted that mistakes were made along the way.
“Maybe we should have done it a little differently,” Mr. Bristow said. “What it proves is that we’re absolutely focused on creating value and we recognize when there’s an opportunity. I think we also learn from times when we fail on our endeavours.”
But by not getting the Freeport deal done, Toronto-based Barrick has found itself in a slightly vulnerable spot. Old foe Newmont Gold, the world’s biggest gold miner, has soundly outperformed Barrick over the past 12 months. And while Barrick and Newmont were once close in stock-market valuation, Newmont now far outranks its Canadian peer.
Taking advantage of a weak spell in Newmont’s shares in 2019, Barrick attempted a hostile takeover of Newmont, but fell short. Two years on, it is Newmont that is in the position to be the aggressor.
When asked in an interview if he’d entertain a Newmont acquisition of Barrick, in which he becomes the CEO of the combined company, Mr. Bristow said, “Of course I’m open to things that create value.”
But Mr. Bristow played down the likelihood of a deal between the two giant miners happening, saying the last time Barrick tried to buy Newmont, it encountered resistance from many shareholders. “It would be interesting to see how the market would respond to something like that,” he added.
Adrian Day, CEO of Adrian Day Asset Management, which owns half a million shares in Barrick, said despite the disparity in valuation between the two miners, Barrick likely won’t fall prey to Newmont, in large part because Mr. Bristow still has a lot of work to do to restore the company to its former heights. “They’ve made enormous strides since the takeover of Randgold [in 2018] but I certainly don’t get the impression that Mark Bristow is saying mission accomplished and wants to move on.”
The only scenario that might pass muster, he said, would be a no-premium acquisition of Barrick by Newmont, where Mr. Bristow runs the show. “It would be difficult for him to say no to that,” Mr. Day said. “His mantra is merging at no premium, and it is essentially what happened when Barrick bought Randgold.”
Deal or no deal, operations-wise, Barrick has plenty on its plate at the moment. A joint venture involving the company and Newmont in the Dominican Republic has lately raised the ire of environmental groups and some local residents.
Barrick is undergoing a major expansion of its Pueblo Viejo mine in the country, but some residents are worried the construction of a new tailings dam may contaminate waterways. Late last month, a protest near the site led to heavy-handed tactics from the police to dispel protesters. “There was a big disturbance and the police did use tear gas to disperse a group of people,” Mr. Bristow said at its annual meeting on Tuesday.
He defended Barrick’s environmental record in the country, saying the Canadian miner has invested a lot of money to rehabilitate polluted waterways left by the previous owners of the mine. Barrick owns 60 per cent of Pueblo Viejo, Newmont the rest. Barrick started production at the mine in 2013 and the expansion would push out the mine life to 2043.
Barrick on Wednesday reported a first-quarter profit of US$538-million, up from US$400-million a year ago. While Barrick sold its bread-and-butter gold at an average price of US$1,777 an ounce, about 12 per cent higher than a year earlier, its average realized copper price was US$4.12 a pound, 22 per cent higher than a year ago.
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