The new Barrick needs to do right by Africa
Randgold CEO has a reputation for eschewing the traditional
So we’re all clear then on the proposed merger between Barrick Gold and Randgold Resources.
Should the no-premium deal be approved as planned in the first quarter of next year, we will see a Barrickbranded entity run by Randgold’s Mark Bristow as CEO and his number two, Graham Shuttleworth, in the CFO’s chair. Two-thirds of the board will be “initially” appointed by Barrick and one-third “initially” by Randgold.
Randgold’s listing on the London Stock Exchange (the company is included in the FTSE 100 index) will be dumped in favour of Barrick’s share trading jurisdictions of New York and Toronto.
And Barrick shareholders, who have come through slaughter these past years, will be left to wonder: who are these new guys so suddenly in charge?
The standard bio on Bristow is that he’s a motorcycle-loving former South African army officer who, as he told the Guardian in an interview in 2011, saw active service against guerrillas in Swaziland and Angola. “It was a big thing being conscripted in 1977 and being sent straight to the border,” he said at the time. “You have to fight a war and you know sweet nothing about it. I’m amazed more of us didn’t get killed.”
Trained as a geologist (he has a PhD from what was the University of Natal) he co-founded Randgold in 1995, driven to create a pan-African pure gold play, which is what Randgold is today with mines operating in Mali, the Democratic Republic of the Congo, Senegal and Côte d’Ivoire.
Along the way he has been credited as a financially prudent straight talker, critical of other mining companies in the sector, both for value destruction (we see you, Barrick) and the faux image they portray of doing good works while they extract riches from far off lands. “They do these presentations showing pictures of snotty-nosed African children, giving them clinics and schools,” he said in that same Guardian interview. “It’s a few hundred thousand dollars a year, maybe a million. But we’ve paid the Mali government $800m in taxes in seven years – you can buy a lot of schools and roads for that money.”
Randgold too has a reputation for eschewing the operational style common to foreign mining companies. “We don’t drag in foreign service providers with us,” he told the Telegraph two years ago. “The mining industry is terrible about ex-patriots, it’s racist.” So far, so admirable. Less remarked upon are the trip wires for mining companies, especially in the DRC.
I recall prepping for a trip to the Congo half a dozen years ago with a past mining executive with a deep love for, and deep experience in, the DRC. He offered a précis of the dysfunctional mining system in the DRC and those close to President Joseph Kabila. “This
coterie, this club, has enriched itself beyond the wildest dreams of people. Beyond the wildest dreams,” he said as we sipped coffee at a downtown Toronto hotel. “I would put it to you that the level of corruption, or let’s call it personal enrichment, is done in such a way that makes Mobutu look like some sort of cowboy gangster. It is an immensely corrupt country.”
The DRC is a treasure chest — diamonds, coltan, copper, gold, cobalt — and a tragedy. Given Bristow’s CV, it’s perhaps not surprising that he could imagine not just winning where so many other mining companies had failed, but in doing right by Africa.
The Kilo-Moto gold belt, in the northeastern reaches of the vast land mass that is the DRC, has been mined for more than a century and it was there that Randgold developed the Kibali gold mine in which it holds a 45-per-cent interest. Gold production from Kibali last year surpassed 596,000 ounces at a cash cost of $773 (U.S.) an ounce, with production for this year targetted at 730,000 ounces.
Here’s where it gets interesting. Adjacent to the Kibali mine lies the Moku-Beverendi property, controlled by the Fleurette Group. Dan Gertler, an Israeli who first began investing in the DRC in diamonds in 1997, has, through the Fleurette Group, spread his interests across the DRC into agriculture, iron ore, copper and beyond.
At least as far back as 2014, Randgold’s Bristow has expressed interest in doing a deal on the Moku-Beverendi project. In April 2016, Fleurette announced a joint venture with Randgold, which would take over the exploration and feasibility of the project and assume a majority stake.
This came three years after Kofi Annan’s Africa Progress Panel released a report on the opaque world of mining concessions in the DRC, concluding that between 2010 and 2012, the country had lost at least $1.36 billion in revenues as a result of underpriced mining assets being sold to offshore companies. In the case of the Kansuki mine, two independent valuations concluded that the sale of the state’s share of the mine to a British Virgin Islands-registered subsidiary of the Fleurette Group, at $17 million, was undervalued by 682 per cent.
In subsequent reports, Global Witness probed what it called “secretive and questionable deals,” alleging that Gertler’s companies “sometimes paid under 5 per cent of market valuation.”
The Fleurette Group has consistently insisted that it has met its disclosure obligations and has criticized what it deems Global Witness’s “amateur, immature financial calculations.”
The bottom line for Randgold is that it was well aware of Gertler’s controversial reputation at the time it entered into partnership with him. That reputation came under fierce fire last December when the Trump administration imposed sanctions through the Treasury Department’s Office of Foreign Assets Control on Gertler-affiliated entities, describing Gertler as an “international businessman and billionaire who has amassed his fortune through hundreds of millions of dollars’ worth of opaque and corrupt mining and oil deals in the Democratic Republic of the Congo.”
By June, the number of sanctioned individuals and entities associated with Gertler had ballooned to 34.
“Treasury is sanctioning companies that have enabled Dan Gertler to access the international financial system and profit from corruption and misconduct,” said Sigal Mandelker, under secretary of the Treasury for Terrorism and Financial Intelligence. “We are using our tools to change the behaviour of those engaged in the looting of natural resources and the humanitarian consequences that follow.”
A spokesperson for Fleurette says via email that the company has not commented on the sanctions directly, and referred me to comments made by Gertler’s lawyers to the Guardian last November when it probed Gertler’s dealings as part of the Paradise Papers investigation.
“Mr. Dan Gertler … transacts business fairly and honestly, and strictly according to the law,” said the statement.
In February, Mark Bristow told Bloomberg that Randgold had issued a default notice to Fleurette Group on the MokuBeverendi project. “We cannot entertain transacting in any form,” Bristow told Bloomberg. “We are a global company and we’re just not going to compromise that.”
Global? Well, in combining with Barrick it certainly would be that. Now Bristow has to convince shareholders that he’s the right executive to help secure Barrick’s place in the top tier, not just of miners, but the people of Africa.