By Allison Martell and Euan Rocha
Dec 4 Barrick Gold Corp, under fire for
missteps in a tough market, started to address investor demands
for a more independent board on Wednesday, by replacing two
directors close to its departing founder with a pair of mining
Incoming chairman John Thornton said he may look at hedging
Barrick's exposure to the price of gold and made it clear that
over the long term, the world's biggest gold producer, could
diversify further into other metals.
As widely expected, Barrick confirmed that Thornton will
replace 86-year-old chairman and founder Peter Munk this spring.
Two other directors will also leave, and Barrick nominated four
new independent directors.
"Slowly, Barrick has been ticking off the boxes as it tries
to turn this big supertanker around," said Barrick shareholder
John Ing, president of Maison Placements Canada. "They have been
very successful as far as addressing a lot of the problems. This
is quite positive."
Barrick's shares have fared worse than many of its hard-hit
peers, and are languishing near 21-year lows, weighed down by
cost overruns at its now mothballed Pascua-Lama gold silver
project in the Andes and its pricey takeover of Africa-focused
copper miner Equinox in 2011.
The Toronto-based company has been under shareholder
pressure to add more mining expertise to its board, and overhaul
its executive pay system.
Its four new board nominees are: veteran Canadian money
manager Ned Goodman, property development executive Nancy
Lockhart, former university president David Naylor and Ernie
Thrasher, founder of closely held U.S. metallurgical coal
exporter Xcoal Energy & Resources.
"Ned Goodman and Ernie Thrasher bring some mining expertise
to the board, which wasn't there," said Michael Sprung,
president of Sprung Investment Management, another shareholder.
Former Canadian prime minister Brian Mulroney and retired
lawyer Howard Beck, both long-term directors, will not stand for
re-election at the next annual meeting.
Barrick, which had been promising changes at the board for
several months, also named former De Beers executive James
Gowans as its next chief operating officer.
The Toronto-based miner has been without a permanent COO
since earlier this year, when Igor Gonzales stepped down.
THORNTON TALKS HEDGES, COPPER
Speaking to reporters at Barrick's headquarters, Thornton
said he would look seriously at hedging.
Barrick unwound its gold hedges in 2009, raising more than
$5 billion so it could benefit as the price of gold rose. Some
investors argue that full exposure to the gold price is the only
reason to buy mining stocks, instead of physical gold.
But Thornton does not see Barrick as just a gold miner, a
view championed by Munk, who took Barrick into copper with the
"We are distinctly positioned over the next decade or two,
if we can execute, to take what's been built and not only extend
it as the world's leading gold miner, but also to take a very
serious look at copper, which we are in and possibly minerals
beyond that, too," said Thornton.
Barrick also said it will announce a new executive
compensation plan at the annual meeting "which will align fully
with the principle of pay-for-performance."
Ahead of the last annual meeting, several Canadian pension
funds opposed Thornton's $11.9 million signing bonus, and
shareholders voted down a non-binding resolution on executive
pay. Proxy advisory firm Glass Lewis advised clients to withhold
votes from three directors.
Despite Barrick's repeated assurances that it would address
investor concerns, Quebec's pension fund - one of the company's
most vocal critics - recently sold 95 percent of its holdings in
A November securities filing shows that the Caisse de depot
et placement du Quebec sold 2.67 million Barrick shares in the
last quarter, leaving it with holdings of only about 148,000
shares in the company. The fund did not provide any detail
around the reason for the move.
"We're encouraged by the steps the company seems to be
taking to enhance the role of independent directors," Caisse
spokesman Maxime Chagnon said. "We look forward to meeting with
the company to better understand these and the further steps
they will be taking to improve the governance of the company."
TURNING TO CHINA
Thornton, former Goldman Sachs second-in-command, was
brought on in part for his exceptional connections in
deep-pocketed China. Observers say he could shore up Barrick by
allying it with powerful investors in China.
But last month's $3 billion public offering proved a tough
sell, and sources familiar with the matter told Reuters that a
recent filing signaling Munk's likely departure had been
intended to win over reluctant investors.
Sources say Munk pushed hard for the Equinox deal, even as
his management team warned against it, as he sought to transform
Barrick into a big diversified miner in the mold of BHP Billiton
The strategy could still pay off, but it has proven
unpopular with many investors.
In an interview published on the Globe and Mail website on
Wednesday, Munk said he had made a mistake: "We bought Equinox
to increase our copper. And that was my first major mistake -
entirely attributed to hubris."