Barrick’s New Chairman Plan to Seek Chinese Deals to Revive the Company’s Glory

Barrick Gold

(Bloomberg) – The current Barrick Gold Corp.’s vice-chairman and the company’s chairman starting December 4, John Thornton, is trying to establish partnerships with Chinese gold mining companies.

The current world’s largest gold miner chairman, Munk, is expected to hand over his office to Thornton at board meeting on December 4 after serving the company 3 decades.

As the current co-chairman, Thornton, is already playing his role to oversee long-term strategy. Thornton, Wall Street banker with no mining background, is trying to make new partnerships with Chinese gold mining companies that might include Barrick and future mining products, according to Bloomberg. Among the potential partners of Barrick that Thornton met, China Investment Corp., the largest Chinese wealth fund.

Barrick had a tough year, losing 41% of its market value in 2013 while debts rises and gold price sinks. Moreover, operating expenses have been rising and mining project in Andes cost reached $8.5 billion. According to Rick de los Reyes, manager of $1.1 billion at T. Rowe Price Group Inc., Barrick’s balance sheet is going to a REALLY big problem unless it get its debt paid down.

Gold price slumped over 25% in 2013 and making its first annual decline after a 12-years bull run. Concerns about the U.S. Federal Reserve cutting back its monthly $85 billion bond purchases were a main drive of this sharp decline in commodities.

However, Barrick Gold still is Canada’s most important and valuable mining company. The company’s rivals, Falconbridge Ltd. and Inco Ltd. were taken over by foreigners in the past seven years.

Chinese Experience

Barrick’s spokesman said that the company is planning to issue an update after the board meeting on December 4.

Thornton spent 23 years at Goldman Sachs and he was seen as the top contender to be the company’s CEO at the early 2000s. He left Goldman in 2003. Thornton headed to China helping a start-up business leadership program at Beijing’s Tsinghua University. He was a board member of China Unicom (Hong Kong) Ltd, the second largest mobile phone carrier in China and a member of China Investment Corp.’s international advisory board. He helped establishing John L. Thornton China Center as he was chairman of the board of trustees of the Brookings Institution.

His experience in East-Asia and China specifically will prove to be valuable at Barrick. The Chinese economic expansion made it the largest commodities consumer in the world, and it overtook India as the world’s top gold consumer this year.

Selling Mines

As a step to cut costs and improve the balance sheet, Barrick raised $3billion in share sale in October to buy-back bonds. The gold miner’s CEO starting June 2012, sold less-profitable gold mines and energy arm, in addition to reviewing other operations.

According to Bloomberg, people familiar with the situation in the world’s largest gold miner says last year’s decision to bring McKinsey & Co. management consultant to re-evaluate Barrick’s strategy was thanks to Thornton. As him as a chairman, there might be more changes ahead for the company. Thornton is open to rethink the entire business, as it may involve acquiring other mining assets such as copper, although he thinks the company’s priority as the leading gold producer.

The gold price slump and rising costs forced Barrick to have $26 billion writedowns, cutting spending and firing workers. Barrick acquired Lumwana copper mine in Zambia through buying Equinox Minerals Ltd. in 2011 for $6.9 billion. Production costs were higher than expected, resulting in $3 billion writedown.

On February, the company suffered another setback when talks to sell African Barrick Gold Plc didn’t success. The company is still open to sell African Barrick, as it has already sold 3 Australian mines in 2013.