Toronto, Canada — 07 June 2012 – Barrick Gold Corporation is poised to resume its focus on gold after firing CEO Aaron Regent, who failed to boost the share prices by expanding into copper with the acquisition Equinox Minerals Limited.
Bloomberg News reports that Barrick, the world’s largest gold producer, has announced that chief financial officer Jamie Sokalsky, 55, will succeed Regent. The company has been “disappointed” by its share- price performance and is “fully committed to maximising shareholder value,” said company founder and chairman Peter Munk, 84.
Regent, 46, spent three years as CEO, during which time he ended Barrick’s multibillion-dollar hedging programme, spun off its African mines and bought Australia’s Equinox Minerals for US$7.1 billion. “Barrick may fail to meet its five- year gold-production target while having to write down some of the US$4.3 billion of copper-related goodwill on its balance sheet,” said Credit Suisse Group AG analyst Anita Soni here.
“We thought you were doing gold, and now you’re doing copper “’ this is completely different from what we were thinking,” said Toronto-based Veritas Investment Research Corporation analyst Pawel Rajszel, referring to the July acquisition of Equinox. “If you’re going to change the strategy, you’ve got to let us know.”
Barrick dropped 5.1 % to C$41.47 in Toronto yesterday, its biggest drop in eight months. The shares are 0.9% higher than they were on 16 January, 2009, Regent’s first day in charge. Gold for immediate delivery in London rose 92% in the period.
The Equinox deal was Barrick’s largest since its US$10.2 billion purchase of Placer Dome Incorporated in 2006. Barrick trumped an unsolicited bid from China’s Minmetals Resources Limited to acquire the copper mine in Zambia and a development project in Saudi Arabia.
“The purpose of a gold company is to have leverage to gold, and if a gold company buys a
100 % copper asset it doesn’t make sense,” John Goldsmith, a Toronto-based fund manager at Montrusco Bolton Investment with about C$5 billion of investments, said in a telephone interview. Goldsmith said he sold his Barrick shares within a week of the deal.
Copper accounted for 44% the US9.63 billion in goodwill Barrick had in its balance sheet as of 31March. Goodwill is the amount exceeding fair value paid by the acquirer. Copper futures have dropped 23% in London since the Equinox deal was completed, while gold prices rose to a record in September.
Barrick produced 7.68Moz of gold in 2011 and is targeting annual output of 9Moz by 2016. Copper production was 451Mlbs last year, and accounted for about 12% of revenue.
Barrick spokesman Andy Lloyd declined to comment on the possibility of a write-down. He said Munk and Sokalsky weren’t available for comment.
Source: Bloomberg News. For more information, click here.