* Equity offering weakness spurs Munk departure, sources say
* Barrick says trying to address investor concerns
* Filing lays out timeline for Munk departure
By Euan Rocha and Michael Erman
TORONTO/NEW YORK, Nov 8 Barrick Gold Corp
signaled on Friday that founder and Chairman Peter Munk
will likely leave the board at next year's annual meeting, a
move that sources say is intended to persuade reluctant
investors to buy into the miner's $3 billion equity offering.
Sources familiar with the situation say banks underwriting
the deal have struggled to sell as much as a third of the shares
on offer. Investors have become increasingly concerned about
Barrick's governance, especially what many see as the board's
lack of independence and Munk's dominant role in the boardroom.
Munk, who turned 86 on Friday, has always driven Barrick's
agenda: he started the company in 1983 and forged it into the
world's largest bullion producer. Along the way, he has built a
reputation as a visionary in the mining industry.
Recent missteps, however, include a disappointing bet on
copper, ballooning costs at its Pascua-Lama project in the Andes
and a huge signing bonus for his heir apparent. These have
prompted some investors to question his leadership.
In an amended regulatory filing relating to the equity
offering - one of the largest in Canadian history -
Toronto-based Barrick said it is working to address shareholder
concerns. It indicated that Munk is likely to bow out by the
time of the annual meeting, which is likely to take place in
"The board is addressing the issues that have been raised
with our directors, which include modification of the company's
executive compensation arrangements, the rejuvenation of the
board through a combination of departures from the board, the
addition of independent directors and succession in the chairman
role at the company, consistent with Mr. Munk's desire to retire
as chairman of the board," the filing said.
Barrick said it intends to update the market before year-end
on those initiatives as well as governance changes expected to
take effect in conjunction with the annual meeting.
Barrick has hinted in the past that Munk was likely to leave
soon, but the company had been vague about the timing. On
Friday, it said the filing was meant to clear up confusion in
the market around the timeline for Munk's departure, even though
it stopped short of specifying an exact date.
Sources familiar with the situation have also told Reuters
that Barrick is likely to formally announce changes to the
board, including Munk's departure, around the end of the year.
Those changes are likely to take effect after next year's
According the several sources familiar with the deal, the $3
billion offer - being run by Royal Bank of Canada,
Barclays Plc and GMP - is proving to be a tough sell with
investors as about $1 billion worth of equity is still unsold.
The company, which has amassed a massive debt load of over
$14 billion, is using proceeds from the offering to pay down
some of its debt in the face of declines in the price of gold.
Barrick's New York-listed shares have traded well below the
offer price of $18.35 through much of this week. With the highly
liquid stock available at better prices on the open market, many
have had little reason to buy shares at the offer price.
Barrick shares, which have fallen 46 percent in the last 12
months, closed up less than 1 percent at C$19.07 on the Toronto
Stock Exchange on Friday.
Long-term investors such as pension funds that are
value-focused are attracted to the offering given the stock's
decline, according to one source, but some of these investors
are the ones that have had the biggest reservations around the
corporate governance issues within the company.
A source at a large Canadian pension fund declined to say
whether the fund would buy into the offering now that Munk has
signaled a timetable on his departure. But the source said that
addressing corporate governance issues would go a long way
toward improving the value of the company in the long term.
Barrick's board opted to go with this financing deal at the
last minute, according to several sources, choosing it over a
plan put forward by its traditional lenders, including Bank of
Nova Scotia, CIBC, JPMorgan, Morgan
Stanley and Bank of Montreal.
Two sources familiar with the matter said the financing deal
was brokered by Barclays Canada Chair Michael Wilson, a former
Canadian minister of finance under then-Prime minister Brian
Mulroney, who now sits on Barrick's board.
RBC declined to comment on the deal. GMP and Barclays could
not immediately be reached for comment.
The Wall Street Journal, citing unnamed sources, said on
Friday that Mulroney and Howard Beck - both long-time directors
on Barrick's board - also indicated they may step down from the
board. Neither of them could be reached for comment.
Barrick faced a minor shareholder revolt at this year's
annual meeting, with around 85 percent of its shareholders
opposing its nonbinding resolution on executive compensation.
The revolt began after a group of Canada's top pension funds
publicly opposed a $11.9 million signing bonus for Co-Chairman
John Thornton, the man tipped as the miner's next chairman.
Proxy advisory firm Glass Lewis, earlier this year, advised
its clients to withhold votes from three directors, as the board
does not have a two-thirds level of independence.
The generous bonus for Thornton was a particular focus of
investor discontent, given problems that have plagued Barrick
for months, including ballooning capital costs at Pascua-Lama, a
mine it was building on the border of Chile and Argentina.
Last month, Barrick said it would stop development of
Pascua-Lama indefinitely, a surprise reversal on a project that
has already cost it more than $5 billion.
Investors have also taken umbrage with Barrick's
disappointing push into copper through its C$7.3 billion ($7
billion) takeover of Africa-focused Equinox in 2011. Sources
familiar with the matter have told Reuters that Munk himself
played a pivotal role in pushing for the deal.