Barrick "peerless" as rivalry rages

The senior gold producers have spent the past few years making themselves more investible by exercising capital discipline, paying down debt and repairing balance sheets, focusing on cost control and margin growth rather than growth per se, returning capital to shareholders through dividends and share buybacks, and giving multi-year production guidance.

The effort has been considerable and transformative for several companies, yet investors have not taken the lure.

The intense competition between Newmont Mining and Barrick Gold can perhaps be epitomized by Barrick chief executive Mark Bristow, who told delegates at the 2023 Gold Forum Americas in Colorado Springs in Colorado, US, that the company he runs is "peerless" before taking a seat directly in front of the podium as his rival Tom Palmer, chief executive of Newmont gave his presentation.

Bristow was the first gold chief executive to talk about a desire to add more copper to Barrick's portfolio, stressing the company's number of tier one assets and being in the best jurisdictions for growth.

Palmer kicked off his presentation with a slide saying virtually the same thing.

Newmont Vs Barrick

Newmont has led Barrick for a while in gold production and market capitalisation and is about to take another great leap forward when it consummates the acquisition of Australias' Newcrest Mining later this year.

In addition to market capitalisation and production bumps (8Mozpa of gold equivalent) opening a lot of daylight between the rivals, Newcrest will give Newmont a lot of copper potential, which has been one of Bristow's key selling points in recent years and much of that is in jurisdictions in which many investors are more comfortable, such as Canada, while Barrick's copper story is in Saudi Arabia, Tanzania and Pakistan.

The Newcrest deal also helps Newmont extend its footprint across the Golden Triangle in British Columbia, Canada, where, in addition to its assets, several development-stage gold-copper assets could become future satellites.

More importantly for the market, perhaps, is that Newmont appears to have been more active and proactive and carries more momentum and excitement about it: a large transaction and a host of new possibilities. All eyes, it seems, are on Newmont.

"2023 will be a transformational year for Newmont," said Palmer as he began his speech, which showed how, by 2050, Newmont will present the market with a leading portfolio of tier one assets and projects in the world's most favourable mining jurisdictions with the industry's best mix of gold-copper assets, and so on.

"We are well positioned to set the new standard for gold mining across the industry," said Palmer.

Bristow has been touting Barrick's discipline in not resorting to buying to obtain growth, a strategy he is very critical of among his peers, even though the company was believed to be close to buying Great Bear Resources for its Dixie project in the Red Lake District of Ontario, which eventually went to Kinross Gold.

There was an expectation that Barrick buying Great Bear would be announced at the 2021 Gold Forum Americas, with the major also signing deals with a couple of very early-stage exploration companies nearby, presumably to build a very large land package for exploration. "I have an allergy to paying premiums for opportunities," Bristow told Mining Journal.

Growth through exploration

Instead of M&A, Barrick seeks organic growth through exploration. This has been a successful strategy for the company. It has successfully grown its resources and reserves near some of its key mining operations, paving the way for mine life extensions and possible extensions. It also allows Bristow to claim the company has the best reserves replacement figures of the industry.

"We offer real organic growth, unlike many of our competitors," said Bristow. "We are projecting a 30% increase in production on the back of the growth options embedded in our asset portfolio," he added.

Barrick has also been an active proponent of gold companies striking deals with host governments and giving them an ownership stake to align everyone's interests in what he sees as a logical progression of the company's previous efforts to partner with other companies in projects."There is no safe jurisdiction, so it is all about how you manage it and the relationship you have with the host country," he said.

Another partnership may be the key to unlocking the development of its Pascua-Lama project in Chile and Argentina and other deposits it has in Chile.

"Our last real challenge is dealing with the Pascua Lama legacy. We are making progress, and it will come out somewhere. Fifty-fifty partnerships are real partnerships. When the industry invests in a country, it promises everything. They run the feasibility against the fiscal law, which sees the local government getting 50-70% of the economics, but as soon as they start development, the way tax works, you build up losses and offset those against revenues, and the government doesn't benefit from their theoretical 65% take, which is why you get aggrieved governments," said Bristow.

Unfortunately for Barrick, its focus on exploration and the best geological districts rather than the safest ones may mean he is losing the fight for investor interest. Bristow indirectly acknowledged this by stating that the company has neglected New York in its investor relations outreach.

New York listing

"We have neglected a lot of new [investor] potential in the US. We have a full listing on the New York Stock Exchange, and we have a new investor relations person who will be based in New York," said Bristow.

Many dual-listed gold companies say they see much more trading volume on their stock with their US listing than their Canadian one.

Earlier in the morning, Alberto Calderon, chief executive of AngloGold Ashanti, said that 60% of the company's investors are in the US, which was the main justification of relocating its primary listing there from Johannesburg. Barrick's NYSE listing arguably has the best ticker in the industry, GOLD.

If the company's investor programme in the US has been deficit, and obvious question is why?

The Newmont-Barrick fight for supremacy will continue, but maybe it is moot, as China's Zijin Mining is arguably the most valuable gold miner in the world.