Barrick Gold at 20-Year Low Turns to Thornton

Barrick Gold at 20-Year Low Turns to Thornton

April 23 (Bloomberg) -– Barrick Gold Corp. (ABX) founder Peter Munk sees a successor in former Goldman Sachs Group Inc. (GS) President John Thornton as the world’s biggest gold miner tries to reverse a 54 percent plunge in market value in the past year.

“I searched the world for a successor,” Munk, the 85- year-old chairman of Barrick, said yesterday in an e-mailed statement. “I am delighted I found John. I am confident he will take Barrick to a new level as a global player.”

Thornton, 59, faces his first annual shareholders’ meeting tomorrow as co-chairman after the Toronto-based miner has struggled with cost overruns, writedowns, and opposition to his $11.9 million signing bonus from shareholders including Canada’s six largest pension fund managers.Barrick, which also reports first-quarter earnings tomorrow, this month lost its position as the top gold miner by market value to Goldcorp Inc. (G), which produces fewer than half the ounces of the precious metal. It’s “appropriate” that the company considers a path to new leadership at a board level, Munk wrote in Barrick’s annual report filed March 25.

“My job was to develop the strategic vision, seek new opportunities, develop strong partnerships, build relationships with government leaders, and navigate some of the tough environments we work in,” Munk said in the e-mail yesterday. Thornton has those skills, he said.

M&A Department

Andy Lloyd, a Barrick spokesman, declined to comment on the timing of a potential succession when reached by phone yesterday. Thornton wasn’t available to comment, Lloyd said.

Thornton joined Goldman Sachs’s mergers and acquisitions department in 1979 and moved to London a few years later to lead the firm’s efforts to break the hold U.K. investment banks had on clients there, according to William Cohan’s book “Money and Power: How Goldman Sachs Came to Rule the World.” During his 23-year career at Goldman Sachs, Thornton spent 1996 to 1998 as chairman of the business in Asia.

Thornton and John Thain rose to become co-presidents of the firm under former Chief Executive Officer Henry “Hank” Paulson at the time of Goldman Sachs’s 1999 initial public offering and for a few years they were seen as the most likely successors. In 2003, when it became clear to Thornton that Paulson wanted to stay in the job for longer, and after then-Vice Chairman Lloyd C. Blankfein was named to join the firm’s board, Thornton left to be a professor at the Tsinghua University School of Economics and Management.

‘Greatest Strength’

Thornton’s “greatest strength” is strategy, said Goldman Sachs Vice Chairman J. Michael Evans, who worked with him in London and New York.

“As co-chairman of Barrick I would have thought he would be bringing a pretty significant strategic dimension to the thinking around where should the company go, particularly in the gold business,” Evans said yesterday by phone.

Thornton remains a professor and director of Tsinghua University’s global leadership program. He’s also chairman of the board of trustees of Washington-based Brookings Institution, sits on the boards of HSBC Holdings Plc, Ford Motor Co. and China Unicom (Hong Kong) Ltd. and has served as a director of Intel Corp. and News Corp.

Thornton, also a member of the international advisory board of China Investment Corp., the nation’s sovereign wealth fund, is one of the top foreign experts on China, said Dominic Barton, the London-based managing director of McKinsey & Co.

‘Unique Line’

“He’s got a very unique line on many different parts of the world,” Barton said yesterday in a telephone interview. “There are not many people like him that have a global view of key countries and markets at the highest level.”

Thornton, who was elected to Barrick’s board in February 2012, joins the company as sentiment toward gold miners has soured. The Standard & Poor’s/TSX Global Gold Sector Index (SPTSGD) of 54 companies, which fell 14 percent and 16 percent in 2011 and 2012 respectively in Toronto, plunged 35 percent this year through yesterday. Gold futures in New York, which rose for 12 consecutive years, have declined 15 percent in 2013 as the metal’s status as a safe haven diminished.

While Vancouver-based Goldcorp lost 45 percent in the past 24 months through yesterday in Toronto, Barrick fell 65 percent. Barrick’s shares, which fell 1.9 percent to C$18.14 at 9:32 a.m. today, hit a 20-year low of C$17.97 on April 17.

The company said Feb. 14 it took a $3 billion writedown on a Zambian copper mine it bought as part of its C$7.3 billion ($7.1 billion) takeover of Equinox Minerals Ltd. after the asset disappointed because of production costs.

‘Woefully Underperformed’

“They have woefully underperformed,” Caesar Bryan, the Rye, New York-based manager of Gabelli & Co.’s $250 million gold fund, which owns Barrick shares, said by phone April 19. “Everyone makes mistakes but we think that the mistakes in Barrick’s case were avoidable and it hasn’t been made clear to us where the responsibility lies and whether these will happen again.”

Earlier this month, Barrick had to halt construction on the Chilean side of its Pascua-Lama project in the Andes after a court accepted an injunction filed by indigenous communities concerned about water supplies. The latest setback follows two increases to the project’s estimated cost last year, to as much as $8.5 billion. In the Dominican Republic, the government is calling for changes to the contract governing Barrick’s newest operating mine, Pueblo Viejo, which it co-owns with Goldcorp.

Barrick seems to be in “disarray” at a board level, said John O’Connell, CEO and fund manager at Davis Rea Ltd., which manages about C$600 million.

‘Inconsistent Decisions’

“There’s been a lot of inconsistent decisions made,” O’Connell said in a phone interview April 19. “People are fed up.”

Barrick is projected to report first-quarter profit excluding one-time items of 86 cents a share, according to the average of 21 analysts’ estimates compiled by Bloomberg. That compares to earnings of $1.09 a year earlier. Revenue is estimated to fall 4.2 percent to $3.49 billion, the average of eight estimates.

Tomorrow’s annual meeting is also the first as CEO for Jamie Sokalsky, who has said he’s reviewing the company’s assets and will emphasize returns and cash flow, rather than increasing output. Barrick announced June 6 that Sokalsky was promoted to replace Aaron Regent, who was fired after the board was “disappointed” with the company’s share price. Thornton’s appointment to co-chairman was announced the same day.

Hiring Thornton was a coup for Barrick, said Ned Goodman, CEO of Toronto-based asset manager Dundee Corp.

‘Has Access’

“This guy is a superstar,” Goodman said in an April 19 telephone interview. “He has access to raise capital in places of the world that very few people actually have access to. As a shareholder of the company I’m very excited about the fact that he’s there.”

“When Peter told me what he had done, I said, ‘My God, you got it cheap,’” Goodman said.

Some Barrick shareholders have questioned the $17 million compensation package awarded to Thornton, particularly an $11.9 million sign-on bonus the company disclosed in its proxy filing last month. Investors including Canada’s six biggest pension fund managers said in an April 19 statement the payment set a “troubling precedent” and that they would vote against Barrick’s resolution on executive compensation and the election of the members of its compensation committee.

‘Limited Explanation’

The funds’ reaction shouldn’t come as a surprise in an era of increasing shareholder concern and willingness to act on compensation issues, said Steve Chan, principal at Hugessen Consulting Inc. in Toronto, which advises boards on compensation.

“The pay is high relative to peers, lacks performance conditions, and there was limited explanation,” Chan said in an e-mail yesterday.

Barton said Thorton’s performance at Goldman was “impressive.”

“He sets very high ambition for whatever institution he’s working with,” Barton said. “That’s a great thing to do and it’s good for Canada to have a guy like that in an important company.”

To contact the reporter on this story: Liezel Hill in Toronto at

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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