NEWSMAKER-Barrick's Regent embraces his roots, defies critics

Wed Apr 27, 2011 10:16am EDT

* Barrick's Aaron Regent has background in base metals

* CEO has faith in copper's long-term fundamentals

* Equinox deal follows move to end gold hedges

* Irish-born CEO is no stranger to dealmaking

By Pav Jordan

TORONTO, April 27 (Reuters) - Two years after taking the helm of Barrick Gold Corp (ABX.TO), Aaron Regent has put his stamp on the world's largest gold miner with a bold diversification that marks a return to his roots.

Barrick's youthful chief executive, who has years of experience leading base-metal mining companies, has a steely confidence in the long-term fundamentals behind surging copper prices. He's more bullish than nearly every analyst who makes forecasts.

It is a perspective that guided his decision to strike a C$7.3 billion ($7.7 billion) deal to buy Equinox Minerals EQN.TO this week and make what his critics say is a ill-advised foray outside gold mining, which has always defined Barrick.

Trumping a bid for Equinox by China's Minmetals Resources -- a unit of a state-owned base metals giant -- Regent stunned the market and precipitated a 10 percent drop in Barrick's share price.

"People have been wondering how he is going to make his mark on Barrick and the fear has been that because of his background in the base metals that he's going to go out and buy copper, and he just went out and did it," said one arbitrageur whose firm owns the stock. He asked to be quoted anonymously in keeping with his firm's policy. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For Barrick results [ID:nN27110953] Breakingviews on Barrick strategy [ID:nN25139710] How the Equinox deal will boost Barrick's copper output:

r.reuters.com/ryp29r ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Regent, who immigrated to Canada from Ireland with his parents when he was a child, is no stranger to big deals.

As chief executive at diversified Canadian miner Falconbridge, he came close to creating the world's largest nickel producer through a merger with Inco in 2005.

The plan fell apart when his own company was acquired in a multibillion-dollar deal by Switzerland's Xstrata XTA.L.

At the time, Regent was building Falconbridge into a world-class copper producer with a target of doubling production to 1 million tonnes a year within a decade. Xstrata essentially continued his strategy.

"His business acumen doesn't need to be proven after what he was able to do in his previous jobs," said Denis Couture, a communications executive who worked with Regent for nearly a decade at Falconbridge and other companies.

Not even a year into the job at Barrick, Regent surprised investors by bringing a quick end to Barrick's long-standing gold hedge program to take advantage of soaring gold prices.

The move exposed the company to the possibility of a price slide but allowed it to benefit fully from any appreciation, a strategy that is currently bringing rich rewards.

Indeed, Barrick posted a 22 percent rise in profit for the first quarter of this year, largely because of surging bullion prices.

LOWERS GOLD EXPOSURE

Equinox is Regent's first major acquisition since he took the reins of Barrick in 2009 at the age of 43. The deal has drawn the criticism of investors because it effectively lowers Barrick's gold exposure, for which investors are willing to pay a premium. The market punished the stock.

"When he covered the hedge book I thought, 'well done Aaron, great move'," said Charles Oliver, a senior portfolio manager at Sprott Asset Management in Toronto.

"This move? You know, we all make mistakes," said Oliver, who played rugby with Regent at the University of Western Ontario. "I think he's certainly going to recognize that the market has penalized him for this."

Barrick will double its position in copper with the acquisition at a time when prices have risen more than sevenfold in eight years, driven by booming demand from China.

Regent -- a married father of three daughters -- sees prices rising even more than even the most optimistic forecasts as the needs of developing economies accelerate, but he won't give figures, saying his outlook is "proprietary".

"We have a strong view that it's going to be a challenge for the industry to mount a supply response. ... We think that the copper market is going to be well supported currently and for the foreseeable future," said Regent, who colleagues say rarely misses his morning run.

Minmetals backed out of a bidding war with Barrick on Tuesday, saying the Canadian miner's counter-offer was too rich. The hasty exit by the Chinese company has led skeptics to question whether Regent may be getting in over his head.

China, which accounts for much of the world's copper demand, has more accurate forecasts for long-term prices than its Western counterparts, according to many experts.

Was Regent playing smart in ponying up $7.7 billion for Equinox?

The most likely the answer is 'yes', says Couture, his former colleague. "His long-term view is always very strategic," he said.

($1=$0.95 Canadian) (Additional reporting by Julie Gordon in Toronto; Editing by Frank McGurty and Peter Galloway)

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