Barrick Gold chief executive Mark Bristow has hit back at “short-termism” among investors as a slump in the miner’s share price endures.
Shares in the company have fallen 30 per cent over the past year, underperforming a 2 per cent rise for its biggest gold-mining rival Newmont, which Barrick tried to acquire for $18bn in 2019.
The divergence in fortunes comes after a period of record high gold prices, which hit more than $2,000 an ounce in August last year. Barrick on Wednesday reported a 78 per cent increase in adjusted net profit for the first quarter to $507m.
But investors say Newmont has a clearer plan to return money to shareholders than Barrick. Newmont has pledged to return 40 to 60 per cent of incremental free cash flow to its shareholders if gold stays above $1,200 an ounce.
Bristow, however, said investors had not appreciated the need to reinvest for the longer-term to find more gold.
“The rise in the gold price has prompted a resurgence of the short-termism which has plagued the market, with some investors focusing on short-term gains rather than sustainable growth,” he said on Wednesday.
If fund managers demanded higher capital returns, governments in countries where the company mines would also want a higher share of the money, Bristow said.
“If shareholders demand returns without looking at the long-term plan . . . then people will get all anxious when the governments start wanting more,” he told the Financial Times.
Barrick said this week it would return $750m to shareholders this year in the form of dividends. That would mean a yield per share of about 3.5 per cent.
John Thornton, chair of Barrick and a former Goldman Sachs executive, said he believed the company’s “sustainable profitability is not yet recognised in the share price”.
Bristow said Barrick had good exposure to rising copper prices via its three copper mines, and would hold on to its Lumwana project in Zambia, which it had previously considered selling. Copper prices hit a 10-year high of $10,000 a tonne this month.
The company was looking for new deposits with both gold and copper, and was also “opportunistic” in terms of mergers and acquisitions, Bristow said.
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Yet a weaker share price means Barrick is more limited in terms of acquisitions. One Barrick investor said the company could even be vulnerable to a takeover approach from Newmont.
Barrick dropped its bid for Newmont in March 2019 after the two companies agreed a deal to combine operations in the US state of Nevada.
Bristow said he supported further consolidation in the gold industry, including a possible merger of South African gold miners Goldfields and AngloGold Ashanti. He indicated Barrick would be interested in buying the 45 per cent share in its Kibali mine in the Democratic Republic of Congo that AngloGold Ashanti holds.
“South Africa deserves a world-class mining portfolio,” he said.