Addressing a small group of international journalists in a quiet corner of the opulent King Abdul Aziz International Conference Center in Riyadh, the ever-ebullient CEO of Barrick Gold – Mark Bristow – reiterates the clear strategy underpinning the single most significant piece of M&A in the mining industry during the last decade. When global mining giant Barrick and Bristow’s former company, Africa-focused Randgold Resources, announced the US$18 billion merger deal at the end of 2018, the industry watched as five of the top 10 Tier 1 gold mines in the world were consolidated under a single umbrella, with the uncompromising Bristow at the helm of the new gold giant.
“A Tier 1 company is a term that is abused at the moment,” he tells assembled media at the inaugural Future Minerals Forum in Saudi Arabia. “For clarity, it is a gold mining company that has more than 10 years of 500,000 ounces or more in its life of mine, and it delivers in the lower half of the cost curve. If you get a project like that in the gold industry, you make more than 15% IRR.” This concept sits at the crux of Bristow’s strategy for running a world-class gold champion like Barrick, which now boasts six Tier 1 mines and a number of additional strategic gold and copper assets in 13 countries stretching from the Americas to Africa, the Middle East and Asia-Pacific.
Barrick’s geographically diverse portfolio is informed by Bristow’s resolute global philosophy; he emphasises that in order to be deemed world-class, you need to be global. The thinking also extends to Barrick’s workforce: “To have the best assets, you must also have the best people,” Bristow says. In a continuation of the ‘Randgold Way’, Barrick invests in local talent, focuses on corporate cost efficiencies and cultivates an ownership mindset amongst management. This combination of best assets and best people delivers a clear outcome: industry-leading returns and sustainable future growth, which has been evidenced by three consecutive years of meeting production targets, leading to booming financial growth and a record $1.4 billion returned to shareholders in 2021.
Tier 1 mines and strategic assets
Not one to rest on his laurels, Bristow followed up the Barrick-Randgold merger with an ‘opportunistic’ joint venture in Nevada with rival gold producer Newmont. At a stroke, the Nevada Gold Mines venture became the single largest gold mining complex in the world, with Barrick owning 61.5% and acting as operator.
A foundation of value, the Nevada complex hosts three Tier 1 mines along with the Goldrush development being integrated into the Cortez mine and other brownfield discoveries, which will significantly extend the life of the mines without adding any big capital expenditure.
“We’re now starting to look at 15-20 years [life of mine] in Nevada. For a gold mine, that sort of life really delivers value,” Bristow reasons.
The remaining Tier 1 assets include Loulo-Gounkoto in Mali, which has 10 years of life remaining and more reserves today than when Randgold first found it, Kibali in the Democratic Republic of Congo (DRC) and Pueblo Viejo in the Dominican Republic. Already one of the lowest cost mines in the world, Pueblo Viejo is in a transitional phase as the plant expansion and a planned new storage facility should extend the mine’s life beyond 2040.
“The rest of the portfolio is what I’d call strategic. For example, the Hemlo project keeps us current in Canada, which is a country where we’d like to grow. Argentina is another dynamic country we like a lot, just like here in Saudi Arabia.”
Barrick’s strict investment criteria demands Tier 1 assets (minimum 500,000 ounces of annual gold production over at least 10 years or 5 million tonnes of annual contained copper over at least 30 years) with a 15% IRR. And they have to be profitable at a gold price of $1,200 per ounce.
For context, there were 11 M&A deals in the gold industry in Q3 2021, which averaged out at about $1,700 per ounce. “This simply will not work for Barrick,” Bristow asserts.
Forging strong partnerships
The ‘Barrick Way’ is also defined by a clear two-way relationship between the company and the host country, which is built on mutual trust and mutual gains. “One of our principal investment filters is centred on the right to mine and the right to repatriate.”
This is rarely an issue for Barrick across the varied jurisdictions it operates in, although ‘wrinkles’ sometimes occur – like in Tanzania and Papua New Guinea (PNG) in recent times. A tax dispute involving a subsidiary and the Tanzanian government was eventually resolved in 2019 when Barrick assumed control of the operations, and the relationship with the government was repaired. In PNG, the Porgera mine was placed on care and maintenance while discrepancy over the renewal of the mining licence was resolved.
“You can go anywhere in the world to mine, even unstable jurisdictions. If you have real partnerships and a licence to operate you can fix problems, and we’re very proud of what we’ve achieved with our partners in Tanzania and PNG.”
Barrick’s partnership with state-run mining company Ma’aden is a key reason behind Bristow’s trip to Riyadh. Throughout the Future Minerals Forum, the CEO has been engaging in productive conversations with the firm’s 50:50 partner at the Jabal Sayid copper mine in Saudi Arabia.
The operation has been commercially producing copper concentrate since July 2016, but since 2019 Barrick has focused on optimising the mine to improve output and overall efficiencies. “We’ve taken the production from 100 million pounds per annum to 150 million pounds, dropped the grade, increased the throughput and dropped the cost,” Bristow explains.
“This has changed our relationship with Ma’aden because they see what we can bring. We still have the same reserves, in fact likely more, than in 2019. We also brought in drill rigs and started looking at the geology.”
The project sits within the Arabian Shield – a generally unprospected geological domain that connects to the Nubian Shield across the Red Sea. Barrick geologists look at Centamin’s Tier 1 Sukari gold mine in Egypt as a huge incentive to ramp up exploration efforts in what could be ‘elephant country’ over the sea border in Saudi Arabia.
Exploration in and around Jabal Sayid continues to progress, but Barrick is also pursuing gold and copper discoveries across the Arabian Nubian Shield. Under its partnership with the Saudi miner, the company will release any mineral discoveries outside of gold and copper to the Ma’aden stable.
“We’ve spent the last two-and-a-half years understanding and evaluating the potential of the Arabian Shield and we are comfortable that this is a place where we should be investing. We look to partnerships first – profitability is a product of business, not the first objective,” Bristow stresses.
The Ma’aden partnership is important because it positions Barrick in the Middle East, which – along with the broader Southern Asia region – forms part of a strategic long-term focus for the Toronto-headquartered company. Opportunities along the Tethyan Belt, a geological structure favourable for gold and copper mineralisation stretching over 5,000 km from Slovakia through the Balkans, Middle East, Asia Minor and on to Malaysia, are of particular interest.
Barrick has just created a new Asia-Pacific team to lead the company’s foray into underexplored regions along the massive belt, which Bristow believes is a ‘critical future resource’ for mining. Building local expertise, wherever the address, is another core tenet of the ‘Barrick Way’ Bristow developed in Africa during the Randgold days.
“We didn’t drag a whole load of expats with us to Africa because we believed the full distribution of intellect already existed in these places. We harvested the talent and showed we could build world-class businesses in places like Mali and the DRC by investing in local skills.”
‘The big S in ESG’
Training local talent and empowering underserved communities through providing economic opportunity is viewed as an indispensable part of Barrick’s modus operandi under Bristow: “Every time you give a man or woman a job you liberate them politically and economically. That’s a big challenge for me personally, having grown up in Africa.”
The company pledges to create robust talent pools by drawing from a diverse range of candidates, including women and early career professionals, while supporting personal growth and development by identifying skill and leadership gaps.
Recent figures depict Barrick’s local employment drive in effect: From 2018 to 2020, hired employees from local communities increased by 55% and local employees in leadership positions increased over 400%. In addition, Barrick procured goods and services worth $847 million with suppliers from communities closest to its operations in 2020.
Barrick has even pushed the envelope in Saudi Arabia with the employment of six women at Jabal Sayid, one of whom is an engineer. “Again, we are making a big difference in our communities,” Bristow smiles.
Mining’s contribution to the low carbon economy of the future has been a central theme of the Future Minerals Forum, particularly after the industry was effectively shut out of discussions at the COP26 conference in November.
While important global decision-makers seem to remain wilfully ignorant of the importance of mining for the global energy transition, Bristow calls on his colleagues to become louder advocates for the positive actions the sector is taking, including the adoption of carbon reduction targets among the biggest players.
“We are proud to have a clear plan to reduce carbon emissions 30% by 2030. We’ve got 25% accounted for, with the remaining 5% still be worked out. And we haven’t touched electric vehicles yet in our calculations.”
Over the next four years, the burgeoning electric vehicle and renewable energy industries will account for 72% of growth in total refined copper demand, according to commodities consultancy CRU. This upward demand trajectory coupled with limited new mine supply avenues is set to contribute to a sustained high copper price environment.
With this tightening supply-demand dynamic in mind, Bristow is asked whether Barrick plans to increase investments in the copper side of the business, which currently accounts for around 20% of revenues, with gold making up the remaining 80%.
“There’s been no shift in strategy,” he confirms. “If you want to keep growing a gold company, you’ve got to go into porphyries, which come up with copper. In these systems, copper and gold are mined together and exploration programmes are no different. We have employed a few additional porphyry skills into the business but there’s no new formula with regards to our gold-copper ratio.”
From strength to strength
All of the topics Bristow touches on during the informal two-hour media briefing tie into a wider portrait of Barrick as a sustainably run, global gold mining champion comprised of the best assets and the best people in the industry.
The combination of world-class mines and disciplined management continues to result in operational success, as demonstrated by the recent announcement that Barrick’s total annual gold production of 4.44 million ounces met the company’s guidance range for 2021. This puts the miner in a strong position to focus on growth areas in 2022 and ensure it keeps on delivering the best returns to shareholders, as the global economy exits the COVID-19 pandemic.
“Mining is a consumptive industry, so you always have to invest in replacing what you mine. We have our clearly defined investment filters and this is key for us, because the big margins we are benefitting from now will close. That’s a fact. If you’re a long-term player, you need to be wary of that and we most certainly are,” he concludes.