John Thorn­ton is no Peter Munk – and that’s the way he wants it. An ex­clu­sive in­ter­view


Bar­rick Gold’s boss says he’s not back­ing down on his plan to wring more cash from the com­pany’s mines, even at the cost of growth. The share price proves in­vestors re­main un­con­vinced. In a rare in­ter­view, the man who stepped into Peter Munk’s shoes speaks with Eric Reg­uly in Lon­don

John Thorn­ton will tell you he saved Bar­rick Gold Corp. from cer­tain de­struc­tion and set it up for fresh suc­cess. The com­pany’s share­hold­ers are not con­vinced. To many of them, Bar­rick looks like the in­cred­i­ble shrink­ing com­pany. Who is right?

Mr. Thorn­ton, ex­ec­u­tive chair­man of the world’s big­gest gold com­pany since 2014, and a for­mer Goldman Sachs Group Inc. pres­i­dent, is ut­terly con­vinced his

over­haul of Bar­rick has changed the Toronto com­pany for the bet­ter – even though its shares have dropped al­most 40 per cent in the past year alone and are down by more than half since their most re­cent peak, in 2016. In an ex­ceed­ingly rare in­ter­view – this is one boss who avoids the me­dia – he is com­ing out of his shell to de­fend a turn­around strat­egy that seems to have alien­ated in­vestors rather than please them.

“Chas­ing ounces,” as he puts it, is not his strat­egy. His plan is to recre­ate Bar­rick as a gold com­pany that does not op­er­ate like a gold com­pany, while invit­ing big-name Chi­nese min­ers to in­vest in Bar­rick projects. To him, growth does not nec­es­sar­ily mean more re­serves, mines and pro­duc­tion; it means more free cash flow – the money left over af­ter the com­pany pays its op­er­at­ing bills and cap­i­tal ex­pen­di­tures.

When free cash flow ex­pands, so does the com­pany’s abil­ity to in­vest in new projects and dole out riches to share­hold­ers.

His plan has, so far, sub­stan­tially re­duced the size of the com­pany by get­ting rid of the sec­ondtier min­ing prop­er­ties. His prob­lem is that Bar­rick’s share reg­is­ter is still loaded with the in­vestors he doesn’t view as ideal – tra­di­tional gold in­vestors – and they do not seem to be buy­ing the freecash-flow pitch. They wince when they see mines be­ing sold and re­serves go­ing in the wrong di­rec­tion. In­deed, Bar­rick is about to lose its sta­tus as the top pro­ducer to Den­ver’s New­mont Min­ing Corp., whose mar­ket value is al­ready higher than Bar­rick’s.

But Mr. Thorn­ton’s strat­egy is backed by a 2017 Paul­son & Co. gold-in­dus­try re­port that lays out the sec­tor’s peren­nial bad per­for­mance – “se­rial value de­struc­tion” – such as cap­i­tal costs that rou­tinely ex­ceed re­turns on cap­i­tal. The re­port says that, since 2010, mis­fir­ing in­vest­ment strate­gies have trig­gered some US$85bil­lion in write­downs, with Bar­rick among the guilty par­ties. The stand­out per­former has been Lon­don-listed Rand­gold Re­sources Ltd., which in­vests only in high-re­turn projects and pro­duces dou­ble-digit re­turns on cap­i­tal. Mr. Thorn­ton greatly ad­mires Rand­gold and wants to em­u­late its su­pe­rior re­turns. Rand­gold has earned a 93-per-cent to­tal re­turn for share­hold­ers in 10 years; Bar­rick, a 61-per-cent loss.

“Some share­hold­ers make the facile as­sump­tion that growth in ounces leads to growth in other fi­nan­cial met­rics, and we know that’s not true,” Mr. Thorn­ton says. “If we could wave a wand, we would have only true long-term in­vestors, which will in­clude gen­er­al­ist in­vestors who are not nor­mally gold in­vestors.”

De­spite the push­back from some in­vestors, and the fallen share price, Mr. Thorn­ton is stick­ing to his guns and seems to be evolv­ing from ex­ec­u­tive chair­man to ex­ec­u­tive cheer­leader. He Bar­rick Gold ex­ec­u­tive chair­man John Thorn­ton, seated at the Pasley-Tyler club in Lon­don on Fri­day, has be­gun an am­bi­tious plan to keep only Bar­rick’s ‘first-tier’ as­sets and sell the rest. Pro­duc­tion has fallen, but so has the com­pany’s debt – by al­most two-thirds at last count.

be­lieves that Bar­rick – now delever­aged, prof­itable more of­ten than not and ca­pa­ble of throw­ing off cash – is fi­nally in a po­si­tion to grow, al­beit care­fully, and that means de­vel­op­ing projects be­yond the phe­nom­e­nally suc­cess­ful Gold­strike play, the re­serve that vaulted Bar­rick into the big leagues.

And the ru­mours are wrong, he says: He’s not hit­ting the road any time soon. He feels his job is only half done and he has no in­ten­tion of hir­ing a chief ex­ec­u­tive to fin­ish the hard lift­ing. He’ll lead that charge, he in­sists: “I’m not leav­ing un­til this com­pany is in the shape it ought to be in. … Ev­ery­thing I have done in my life I have done to a high stan­dard. I have al­ways stuck at things un­til I was ei­ther chucked out or achieved what I want to achieve.”

John Law­son Thorn­ton ar­rived in Lon­don last week on Bar­rick’s Gulf­stream V jet – fly­ing com­mer-

cial is not his style. A ten­nis fan, he had been at the U.S. Open in New York, where he saw No­vak Djokovic play. All three of his sons are ten­nis play­ers; the youngest, Elisha, plays on the Euro­pean ju­nior cir­cuit. His daugh­ter, Alexandra, prefers horses. She is on the Bri­tish na­tional show-jump­ing team (the three old­est kids were born in Bri­tain and have Bri­tish pass­ports).

Mr. Thorn­ton is sit­ting in a pri­vate room on the sec­ond floor of the Pasley-Tyler club on Berke­ley Square, in Lon­don’s May­fair, one of the world’s wealth­i­est neigh­bour­hoods. Ge­orge Hamil­tonGor­don, who would be­come Bri­tish prime min­is­ter in 1852 and was forced to re­sign af­ter tak­ing the blame for the botched Crimean War, was one of the il­lus­tri­ous in­hab­i­tants of the 18th-cen­tury house. The build­ing be­came a quiet re­treat for ex­ec­u­tives in 1996. Its walls are cov­ered with clas­sic and mod­ern art; the re­cent works in­clude pieces by Damien

Hirst, Banksy and Nick Walker.

Mr. Thorn­ton fits well into the prim sur­round­ings. He wears a trim, dark blue, two-but­ton suit, light blue shirt and con­ser­va­tive blue tie. He has an en­vi­able mane, by now all grey. Ev­ery cou­ple of min­utes, he flicks his head back like a fash­ion model to clear the hair from his face. He speaks forcibly and never pro­vides short an­swers – even to short, di­rect ques­tions. Ev­ery­thing is put into con­text. “Let me ex­plain…” he says, ex­plain­ing away for sev­eral min­utes or longer.

He ra­di­ates con­fi­dence and met­tle, not sur­pris­ing for some­one who al­most made it to the very top of Goldman Sachs, where he worked from 1980 to 2003, build­ing its Lon­don and Asian busi­nesses – China would be­come his spe­cialty – and earn­ing his rep­u­ta­tion as a savvy merg­ers-and-ac­qui­si­tions artist. By the last decade, he was so wealthy that he could pay US$80-mil­lion for a lime­stone villa in Palm Beach, Fla., which he shares with his wife, nov­el­ist Mar­garet Bradham Thorn­ton. “It’s an oa­sis,” he says.

He is well rounded – type-A poly­math might be good de­scrip­tion.

Born in Man­hat­tan and raised in nearby Bronxville, he has a his­tory de­gree from Har­vard, is one of Ford Mo­tor Com­pany’s longest­serv­ing di­rec­tors, is chair­man of the board of trustees at the Brook­ings In­sti­tu­tion think tank in Wash­ing­ton, D.C., and holds, or has held, a flurry of di­rec­tor­ships and ad­vi­sory roles in com­pa­nies and agen­cies rang­ing from Ru­pert Mur­doch’s News Corp. and Laura Ash­ley Hold­ings to the China In­vest­ment Corp. sov­er­eign wealth fund and the China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion. He reg­u­larly ad­vises the Chi­nese au­thor­i­ties, in­clud­ing China In­vest­ment Corp., on U.S. Pres­i­dent Don­ald Trump’s es­ca­lat­ing trade wars and other Trumpian mat­ters.

Bar­rick was built by Peter Munk, the Hun­gar­ian-Cana­dian min­ing and prop­erty ty­coon who re­tired as chair­man in 2014, leav­ing be­hind an ail­ing com­pany, and died in March at 90. Mr. Thorn­ton and Mr. Munk had known one an­other since the 1980s, when they met through David Wynne-Mor­gan, the old Bri­tish PR warhorse who was Mr. Munk’s long-time com­mu­ni­ca­tions ad­viser. At the time, Mr. Wynne-Mor­gan worked with Mr. Thorn­ton on hos­tile-takeover de­fences.

As Mr. Munk grew frail in old age, and as Bar­rick took on ap­palling amounts of debt and cre­ated messes in a few spots, no­tably in Tan­za­nia and at the Pas­cuaLama prop­erty in the An­des, he blew se­nior ex­ec­u­tives out the door and be­gan look­ing for a new boss who could fix the com­pany. His first choice was said to be Nathaniel Roth­schild, the Bri­tish min­ing fi­nancier and son of the fourth baron Roth­schild, Ja­cob Roth­schild. When the courtship faded, Mr. Munk turned to Mr. Thorn­ton and, in 2012, ap­pointed

him co-chair­man. Mr. Thorn­ton’s de­ci­sion to ac­cept the job was no doubt made eas­ier by the pay pack­age, worth US$17-mil­lion in his first year.

When he be­came ex­ec­u­tive chair­man two years later – Bar­rick has had no chief ex­ec­u­tive since Jamie Sokalsky left in Septem­ber, 2014 – he didn’t have to think hard about what to do. Bar­rick was sit­ting on more than US$15-bil­lion of debt, had sunk some US$8-bil­lion into Pas­cua-Lama with noth­ing to show for it, had al­most blown its brains out on the wildly over­priced, $7.3-bil­lion (Cana­dian) pur­chase of the Equinox Min­er­als cop­per-gold com­pany in 2011 and was bleed­ing hor­ren­dous amounts of cash.

And the price of gold was fall­ing. Mr. Thorn­ton (“the new sher­iff in town” – his words) hit the panic but­ton. “Bar­rick was in very bad shape in the sense that its bal­ance sheet was way, way out of whack, es­pe­cially for a com­pany that de­pends on gold prices for its for­tunes,” he says. “It was fac­ing an ex­is­ten­tial cri­sis. If the gold price had gone badly against it, then it would have been in real trouble.”

He would ham­mer the debt and costs down fast through as­set sales and a vi­cious round of staff re­duc­tions that have yet to end. But what he re­ally wanted to do was give the com­pany a per­son­al­ity change. “Tak­ing it back to the fu­ture,” as he puts it, by mak­ing it a lean, en­tre­pre­neur­ial part­ner­ship with no mid­dle man­age­ment, just as he be­lieves it was in the early days when Mr. Munk and his cronies were run­ning, and own­ing, the show.

The as­set sales were de­signed to pro­pel Bar­rick into the pre­mium end of the gold-min­ing sec­tor, even if it meant shrink­ing the com­pany dras­ti­cally. Mr. Thorn­ton wanted to keep only “first­tier” as­sets, de­fined as those ca­pa­ble of pro­duc­ing 500,000 ounces a year over 10 years and oc­cupy the lower half of the cost curve. Ev­ery­thing else was up for grabs. Of the 18 as­sets – min­ing projects or stakes therein – that have been sold out­right, partly sold or closed since 2006, eight of them went out the door un­der his reign. The good news is that debt has plunged by al­most twothirds, to US$5.8-bil­l­lion, at last count. The bad news is that pro­duc­tion has fallen by about a quar­ter, to last year’s 5.3 mil­lion ounces, and out­put will be no more than five mil­lion ounces this year and pos­si­bly a few hun­dred thou­sand less.

The mid­dle-man­age­ment head­count has fallen by half, to 700 or so, and is still fall­ing. “Seven hun­dred is still far too many,” Mr. Thorn­ton says. “We want to get it down to 300. At Goldman Sachs, [cut­ting] 10 per cent was like breath­ing. We did it ev­ery year.”

Next up for the Thorn­ton treat­ment was the own­er­ship cul­ture, or lack thereof. Shortly af­ter he be­came ex­ec­u­tive chair­man, he dis­cov­ered to his shock that only two man­agers owned Bar­rick shares. He in­sisted that all em­ploy­ees be­come own­ers. To­day, they col­lec­tively own two mil­lion shares, and Mr. Thorn­ton owns 2.7 mil­lion (he has in­vested all his com­pen­sa­tion in Bar­rick shares). He also cre­ated a Wall Street-style part­ner­ship sys­tem, which has seen the top 50 em­ploy­ees “elected” to part­ner­ship level by a vet­ting com­mit­tee. Their com­pen­sa­tion is in good part tied to a longterm in­cen­tive pro­gram that is paid in shares, which can­not be sold un­til they re­tire from the com­pany.

The up­shot, he says, is that the new Bar­rick has gone back to its roots, em­brac­ing the cul­ture cre­ated and honed by Mr. Munk in Bar­rick’s glory years, be­fore it be­came a top-heavy, ac­ci­dent­prone colos­sus. “Bar­rick back then had a part­ner­ship cul­ture, a de­cen­tral­ized busi­ness model with a very small, high-qual­ity head of­fice that only al­lo­cated cap­i­tal and al­lo­cated peo­ple,” Mr. Thorn­ton says.

Has his over­haul worked? The share price says no. The shares have fallen twice as fast in the past year as New­mont Min­ing Corp.’s, even though Bar­rick’s debt load is vastly smaller and prof­its have re­turned – the ad­justed net profit last year was US$876-mil­lion. (In 2013, the loss was an as­tound­ing US$10-bil­lion.) The com­pany has re­ported pos­i­tive free cash flow, but in the sec­ond quar­ter the fig­ure was neg­a­tive US$172-mil­lion. Fall­ing gold pro­duc­tion can take some of the blame, along with sup­ply prob­lems in Tan­za­nia and Ar­gentina and greater in­vest­ment in the core Gold­strike prop­er­ties in Ne­vada. The big­ger prob­lem might be the lack of a growth strat­egy – or at least one that is ap­par­ent to in­vestors.

Pierre Lassonde is among the non-be­liev­ers in Mr. Thorn­ton’s strat­egy, even if his old part­ner, Sey­mour Schulich, is buy­ing into it (in an e-mail, Mr. Schulich said, “If [Mr. Thorn­ton] ever leaves, I would sell out”). Mr. Lassonde, the for­mer New­mont pres­i­dent who founded Franco-Ne­vada Corp., the gold roy­alty com­pany, with Mr. Schulich, thinks Mr. Thorn­ton, who had never set foot un­der­ground un­til he joined Bar­rick, “to­tally mis­un­der­stands” the min­ing busi­ness.

He be­lieves Mr. Thorn­ton’s ef­fort to max­i­mize cash flow by work­ing the high-grade mines hard and dis­card­ing the rel­a­tively low-grade ones will hurt the busi­ness over the long term be­cause it re­duces the re­serve life, mean­ing the chances of hit­ting a jack­pot cycli­cal up­swing, which tends to hap­pen ev­ery few decades or so, are cut short. He also thinks sell­ing big mines is a big mis­take, even if their ore grades are not in the top tier, be­cause gold finds of any size are be­com­ing a rar­ity. “His­tory has shown that most of the value in the min­ing busi­ness comes from the drill bits, not from fi­nan­cial trans­ac­tions,” Mr. Lassonde says.

John Thorn­ton may be a great be­liever in his Bar­rick turn­around plan, but he has not been a great in-your-face sales­man for the com­pany in the way Peter Munk was. He al­most never gives in­ter­views or talks to an­a­lysts, though he does meet with the big-name share­hold­ers.

Un­like Mr. Munk, he is not seen as the pub­lic face of Bar­rick – the com­pany re­ally has no pub­lic face. Like Mr. Munk, he has a rep­u­ta­tion for be­ing a bit too much in con­trol. As if to prove the point, Kelvin Dush­nisky parted com­pany with Bar­rick, where he had been pres­i­dent, in July to be­come chief ex­ec­u­tive of South Africa’s An­glo-Gold Ashanti Ltd. Bar­rick in­sid­ers say Mr. Dush­nisky, a Bar­rick man since 2002, wanted to run a big gold pro­ducer and knew he would never get that op­por­tu­nity as long as Mr. Thorn­ton was around.

Aware that the mar­ket is not buy­ing his mes­sage, Mr. Thorn­ton is try­ing to con­vince share­hold­ers that Bar­rick is set to re­sume growth.

Three new projects will add about one mil­lion ounces a year, but they won’t come on stream for at least four more years and won’t re­ally move the pro­duc­tion nee­dle that much. A lit­tle more than a decade ago, Bar­rick was pro­duc­ing more than eight mil­lion ounces a year, about 50 per cent more than last year’s out­put. Mr. Thorn­ton is also busy re­cruit­ing part­ners for some of Bar­rick’s most promis­ing projects, sug­gest­ing to some in­vestors that he is giv­ing away a heap of po­ten­tial fu­ture value. Mr. Lassonde says Mr. Thorn­ton “doesn’t seem to un­der­stand how hard it is to find great de­posits, as he is sell­ing out some of Bar­rick’s best.”

An­a­lysts agree that wan­ing pro­duc­tion can rat­tle in­vestors even if the fi­nan­cial met­rics have im­proved. In a re­cent note, Bank of Amer­ica Mer­rill Lynch, which has a “neu­tral” rat­ing on the stock, noted the “medium term de­clin­ing gold out­put pro­file and still sub­stan­tial debt bur­den.” Mac­quarie Re­search has an “out­per­form” on Bar­rick. And TD Se­cu­ri­ties has a “hold.”

Mr. Thorn­ton has brought in Chi­nese in­vestors to two large mines: Pogera in Pa­pua New Guinea (47.5-per-cent owned by Bar­rick and 47.5 per cent by Zi­jin Min­ing) and the high-alti­tude Ve­ladero site in Ar­gentina, a 50-50 joint ven­ture with Shan­dong Gold. Shan­dong has been in­vited to eval­u­ate the Pas­cua-Lama site, which was moth­balled af­ter the hideous cost over­run that had so en­raged Mr. Munk. Mr. Thorn­ton says there is “an al­most-100-per­cent” chance the Chi­nese will get in­volved in Bar­rick’s bro­ken projects in Tan­za­nia, which are run through its 64-per-cent own­er­ship of Aca­cia Min­ing PLC (for­merly African Bar­rick). The Aca­cia mines have never paid a dime of in­come tax to the Tan­za­nian gov­ern­ment, Mr. Thorn­ton says, and the gov­ern­ment, which has banned the ex­port of gold con­cen­trates, wants a new deal.

Mr. Thorn­ton says the Chi­nese bring cap­i­tal, tech­ni­cal ex­per­tise and – above all – po­lit­i­cal con­nec­tions in Africa and parts of Latin Amer­ica that Cana­dian and Amer­i­can min­ing com­pa­nies sim­ply can’t match. “From Bar­rick’s point of view, it’s one thing to be a Cana­dian com­pany. It’s an­other to have China as your part­ner,” he says. “What we’re do­ing is so much big­ger than Bar­rick. We need fi­nan­cial and po­lit­i­cal risk mit­i­ga­tion. If I know one thing, I know this is right. We have the thinnest tal­ent in the most dif­fi­cult ar­eas and we can’t de­velop all th­ese projects alone.”

He is also ex­plor­ing the idea of form­ing a cop­per com­pany with Chi­nese min­ers – cop­per be­ing Bar­rick’s sec­ond-most im­por­tant prod­uct; the com­pany pro­duced 413 mil­lion pounds of it last year.

Is Bar­rick sell­ing it­self to China by stealth? “No,” he says. “But we’d rather own 50 per cent of 100 rather than 100 per cent of zero. That’s what we’re talk­ing about.”

[Mr. Thorn­ton] doesn’t seem to un­der­stand how hard it is to find great de­posits, as he is sell­ing out some of Bar­rick’s best. PIERRE LASSONDE FOUNDER, FRANCO-NE­VADA CORP.


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