Review of Barrick’s asset base
The merger of Barrick Gold (GOLD) and Randgold Resources will be a step toward improving the combined entity’s shareholder returns. Through the merger, the companies intend to achieve sector-leading (GDX) (JNUG) returns. To achieve these returns, the new Barrick will undergo a critical review of its asset base and decide whether to dispose of some of its assets.
The company plans to concentrate on only Tier 1 assets. Barrick’s executive chair, John Thornton, explained during the company’s third-quarter earnings call that Tier 1 assets are those with the following properties:
- produce more than 500,000 ounces per year
- have mine lives greater than ten years
- are on the lower half of the cash-cost curve
The company is planning to initiate a number of strategic changes, including asset sales and new investments, in February. The assets under review for disposal include its 50% stake in the Kalgoorlie mine in Australia, its Hemlo gold mine (GLD) in Canada, and its Lagunas Norte mine in Peru.
Leaner and stronger
In an interview with Sky, CEO Mark Bristow said, “There is a cleanup moment.” He added, “The positive is there is nothing radioactive anymore in the Barrick portfolio. So there isn’t any stress to do things under duress. We are going to be very considered in the way we approach things. We want to deliver high-quality assets that can attract the investment required.”
Bristow is also focusing on making Barrick leaner and automating and streamlining both its operations and management. The new Barrick will also use contractors for the jobs the company doesn’t have the skills for, which is Randgold’s strategy.