HOW THE BARRICK CHAIRMAN AND THE CHIEF OF RANDGOLD BONDED DURING A TRIP IN THE CONGO.
BARRICK’S THORNTON AND RANDGOLD’S BRISTOW GETTING TO KNOW EACH OTHER
This summer, Barrick Gold Corp.’s executive chairman John Thornton visited the Democratic Republic of Congo, spending a week in the destitute but resource-rich country, visiting mines and meeting with Mark Bristow, chief executive of Randgold Resources Ltd.
Now, the company is pointing to the trip as evidence that Thornton and Bristow — who would hold respective roles as executive chairman and CEO under a proposed merger — have thoroughly tested their working relationship.
Still, analysts and others in the sector have flagged the two executives’ dynamic together as one of the key risks of the merger, given that their stated plan is to work as equals and split leadership responsibilities: Bristow would manage mines, and Thornton would handle strategy.
Both men are known for outsized personalities and are used to being in charge. Bristow founded Randgold in 1995, and has been CEO ever since, earning a reputation, as he has put it in May as “a one-man show.” Meanwhile, Thornton, who emphasizes his disciplined style, eliminated the chief executive position at Barrick and instead relied on a president — a role that has been empty since the summer.
“We assume that Mark Bristow has been assured of full operating autonomy from John Thornton, who will remain executive chairman, rather than chairman,” Citi analyst Alexander Hacking wrote in a note, under the subhead, ‘Buying a CEO.’
Despite calling their relationship a risk, Hacking upgraded Barrick to ‘buy,’ calling Bristow “the most successful CEO in the sector.”
Against this backdrop, Barrick is pushing back against the idea that there is any risk of conflict, or that Thornton — who is halfway through a plan to cut nearly 480 administrative positions, and plans further reductions postmerger — would have trouble with another strong personality.
“We sort of think this is idle chatter,” said Andy Lloyd, a Barrick spokesman. “It’s kind of an obvious thing people have said but is not grounded in a lot of reality.”
During conference calls, the two men emphasized they share many values — such as owning shares in their company, creating dividends for shareholders and prioritizing free cash flows above size.
Still, the differences between the two men are apparent: Bristow, a South African, is known for his hands-on approach at mines, and working in dangerous countries in Africa.
Thornton, a former Goldman Sachs banker — who has said he went into an underground mine “for the first time in my life” in 2016 — lives in Florida and has made forming more partnerships with Chinese companies, to benefit from their growing global power, a centrepiece of his strategy at Barrick.
Neither man plans to live or keep an office in Toronto if the proposed US$6-billion all-share merger, in which Randgold shares are being valued at 6.2 Barrick shares, is approved by investors at a meeting tentatively scheduled for Nov. 2.
Both declined to comment for this article.
Lloyd said there have been ample opportunities for the two men to see if their personalities meshed. In July, Bristow hosted a summit in Toronto for Thornton and other senior leaders at Barrick.
During the past three years, he said they visited mines together, such as the trip to DRC this summer, where Randgold operates a mine, and which Barrick’s board also attended.
“They’ve done trips like that where they spend a few days together,” he said. “They’re pretty much talking all the time and on email. It’s been a close and long courtship in a sense.”
Last week, the two men met in Wyoming, where Bristow has a home, to film a promotional video for the merger.
Although Randgold is a smaller company, producing just 1.3 million ounces of gold from four mines in Africa, it is expected to account for roughly 50 per cent of $1-billion in free cash flow under a combination with Barrick, according to an analysis by TD Bank’s Greg Barnes.
That money could be reinvested in Barrick’s projects in Nevada, where it has several prospective mines that will require billions of dollars to build and explore.
“We believe that a stand-alone Barrick would have struggled to fund this level of capital spending,” Barnes wrote in a note, and upgraded Barrick to ‘buy.’
Shares in Barrick and Randgold are up, respectively, 6.8 per cent and nine per cent since the merger announcement.
Simultaneously with the deal, Barrick announced it is investing US$300 million in one of its Chinese partners, Shandong Gold Group Ltd., which is preparing for an initial public offering in Hong Kong; at the same time, Shandong committed to buy up to US$300 million in Barrick’s shares.
Still, skepticism about the deal persists in some quarters.
On Wednesday, credit rating agency DBRS Ltd. placed Barrick’s triple-B rating, which had been trending positive, under review while it studies the transaction’s impact on the company’s credit.
“Randgold’s operations are in Africa, increasing Barrick’s political risk,” the agency said in a press release.
One industry executive who asked to remain anonymous, said he would want assurances that Bristow — who made his career on his ability to run mines in politically unstable jurisdictions in Africa, an area where Barrick has struggled — can’t walk away from the combined company.
“Who the hell is going to run all these things in Africa if he’s gone?” the executive asked.
But Barrick has not revealed any details about whether Bristow will have a contract, or what his compensation will be. Last year, he earned $9.6 million, which is about half of the $18 million pay package that Thornton received in 2012 when he joined Barrick, initially as independent director and then as a co-chairman of the board.
More details may emerge when the company releases a circular in coming weeks ahead of its November shareholder meeting.
So far, shares of both companies have been rising since the announcement, suggesting shareholder support.
Barrick has suggested it has prioritized keeping only three of its current mine portfolio, and plans to continue selling mines. Many analysts have suggested the deal with Randgold could spark more deals in the gold mining sector.
“I certainly wouldn’t be surprised to see it,” said Kelvin Dushnisky, who departed as Barrick’s president earlier this summer to join rival AngloGold Ashanti Ltd. as president.
Dushnisky, however, said his own company was focused on cleaning up its own portfolio.