(Corrects to million, not billion, in tenth paragraph)
By Nicole Mordant and Allison Martell
Dec 3 Soon after he joined Barrick Gold Corp's
board last year, John Thornton, the designated
successor to founder and chairman Peter Munk, took a company
team to visit Ford Motor Co and learn about the
automaker's turnaround story.
Ford, where Thornton has been a director since 1996, and its
Detroit peers were on the skids just four years ago. But now the
automaker is posting record earnings after a major overhaul of
its costs and products.
The expedition to Ford may offer a glimpse into what the
former Goldman Sachs Inc second-in-command thinks is
needed at Barrick, the world's biggest gold producer, as it
faces a host of challenges amid a diminished outlook for the
The 59-year-old American, a China hand who is expected to
become sole chairman at Toronto-based Barrick by next spring,
takes charge at a time when sentiment has soured on the mining
sector after cost overruns and a sinking gold price. Observers
say he could shore up Barrick by allying it with powerful
investors in China.
Munk, a controversial figure who many say holds too much
sway in the Barrick boardroom, picked Thornton as his
co-chairman and successor, and the pair have worked closely for
more than a year.
Barrick has underperformed many of its peers so far this
year. Its shares are languishing near 21-year lows, hurt also by
market dissatisfaction with the company's governance and
corporate missteps that include ballooning costs at its
Pascua-Lama project in the Andes and a disappointing copper mine
purchase in 2011.
"The whole industry is going through a pretty radical
rethink about their strategy," said Goldman Sachs Vice-Chairman
Michael Evans. He said China is the key strategic consideration
not just for Barrick but for the entire industry.
"I think John will use that seat as chairman to think about
transformational change in people, strategy, culture, whatever.
It's the way he thinks," said Evans, who has known Thornton for
20 years and witnessed his ascent at Goldman.
Yet Thornton, who lacks a mining background, may not be
every investor's dream chairman.
There is no evidence yet that he has bolstered Barrick's
ties with Chinese investors. Meanwhile, his $11.9 million
signing bonus inspired a minor shareholder revolt. And some
investors are disappointed that he has not acted more quickly to
align executive pay with performance at Barrick as he was fresh
from doing just that at HSBC Holdings, where he was
head of the board's compensation committee.
"When Thornton joined in 2012, there was an expectation
level that change would be effected much quicker," said Onno
Rutten, a portfolio manager with Mackenzie Investments' precious
metals and resources funds, which own about 1 million Barrick
Barrick's board is mulling changes to its executive
compensation, according to a recent filing. Sources familiar
with the situation say it will soon announce a revamped board,
including new independent directors.
Chairman of Barrick is not a ceremonial role, and that is
not likely to change under Thornton, who is known as a hands-on
board member. Thornton joined Barrick's board 21 months ago and
was named co-chair in June 2012.
To his supporters, the father of four is a bold visionary
with unparalleled government and business connections in
deep-pocketed China, one of the world's largest metal consumers,
and those ties are a key reason Munk picked him for Barrick.
After boarding school in Connecticut, Thornton completed
programs in history, law and management at Harvard, Oxford and
Yale. He has been a director at not just Ford and Barrick but
also at Intel Corp, China Unicom and News
Thornton left Goldman in 2003, when he was co-chief
operating officer, after it became clear he would likely wait
years for a shot at the top job.
One of a handful of partners who built Goldman's businesses
in Europe and Asia in the 1980s and 1990s, he chose an
unconventional second career in 2003, teaching a leadership
seminar and serving on the advisory board of Tsinghua
University's business school, a top institution in Beijing.
"What few would have known or appreciated was the importance
attached to such an appointment by the Chinese government,"
wrote Charles D. Ellis in his 2008 book, "The Partnership: The
making of Goldman Sachs," noting that Thornton was the first
non-Chinese person in such a position.
The job had Thornton commuting between his home in Palm
Beach, Florida, and Beijing once or twice a month and made him a
teacher and mentor to many of China's political elites.
A training ground for China's senior leaders, Tsinghua
counts President Xi Jinping, former president Hu Jintao and
former premier Zhu Rongji among its alumni. Thornton also serves
on the International Advisory Council of Chinese sovereign
wealth fund CIC (China Investment Corp).
Barrick recently held talks with CIC and other investors
about potential partnership opportunities, said two sources who
asked not to be named as the talks were confidential.
Sources familiar with Barrick's discussions say the
company's efforts go beyond merely securing a passive equity
investment in the company. Two sources said Barrick was
interested in a deeper, long-lasting partnership with the
Chinese that could include co-development and co-financing on
big projects, possibly Pascua-Lama.
FRIENDS IN HIGH PLACES
Teaching some of China's current leaders gave Thornton "the
kind of trust, the kind of acceptance, the kind of relationships
in a country where the fuel for our next phase of growth" will
come from, Munk said in April.
Dominic Barton, global managing director of management
consultancy McKinsey & Co, went to Thornton for advice a decade
ago when he moved to Shanghai as McKinsey's Asia chairman.
Barton remembers a phone call some years back from Thornton
inviting him to a workshop with a Communist Party official named
Xi Jinping - now president.
A source familiar with a recent meeting Barrick arranged
during the United Nations General Assembly said the foreign
minister of China, Wang Yi, attended "because John was there."
Even so, several banking and industry sources say Thornton
faces an uphill climb in forging deeper ties with the Chinese.
They say the country is more interested in investing in
industrial metals like copper and iron ore than a precious metal
Thornton, who chairs the board of the Brookings Institution,
one of Washington's most influential think tanks, has
connections outside China as well.
Political connections are increasingly important to miners
as governments around the world demand higher environmental
standards and more taxes. In Chile, costs at Barrick's
Pascua-Lama gold and silver project have risen in part because
of requirements that the miner address environmental concerns,
especially around contamination of water.
According to sources familiar with the situation, Thornton
held talks with the presidents of Chile and Argentina to work
through obstacles facing the project, which straddles the border
between the two countries.
But it is not clear how much progress he made. The massive
project, which has long-running and complex problems and has
drawn opposition from a nearby indigenous group, was shelved in
A key question for Barrick shareholders is whether Munk, 86,
will still hold sway in the Barrick boardroom after he steps
down as chairman. Many have complained that Munk has been too
But McKinsey's Barton said the gray-haired, bespectacled
Thornton is his own man, and not easily cowed. Barton recalled
attending a meeting with Thornton and a Chinese client some
years back. Thornton opened by asking the chairman whether he
was more loyal to his company or the Communist Party, a
sensitive question in China.
"When the translation happened, people sucked their breath
in a bit, and I was going, 'Yup, we're out this account.' But it
was good. The guy actually smiled," said Barton.
(Reporting by Nicole Mordant in Vancouver and Allison Martell
in Toronto; Additional reporting by Euan Rocha in Toronto;
Editing by Janet Guttsman and Douglas Royalty)