Barrick Gold Corp., the world’s second-largest producer of the metal, will exceed its two-year goal of selling $1.5 billion in assets by the end of 2020, Chief Executive Officer Mark Bristow said.
Those sales — along with a strong tailwind from higher gold prices — allowed the company to boost its dividend once again, while cutting debt. However, shedding assets also shrank the miner’s production profile, causing it to lower its five-year guidance and think seriously about adding copper to its portfolio.
“If you’re going to be a major player, you need to have copper in your portfolio,” Bristow said in an interview following the release of the miner’s fourth-quarter earnings. “You need to remain relevant.”
Barrick announced its initial asset-sales target in the wake of its $5.4 billion acquisition of Randgold Resources Ltd. last year. The Toronto-based miner sold a number of assets in 2019 including its 50% stake in the Kalgoorlie mine in Western Australia.
“We’re going to beat it,” Bristow said Wednesday of the $1.5 billion target. “We still have some work to tidy up the portfolio.” The company has roughly $450 million in sales to go to reach the $1.5 billion mark, but expects to sell more than that this year, he said.
The sales — part of the company’s focus on “tier one” assets — have forced Barrick to narrow its five-year annual production range to 4.8 million to 5.2 million ounces. “This is our base plan and of course there are upsides that we’re working on.” In November, Barrick had said it expected to maintain its five-year gold production within a range of 5.1 million to 5.6 million ounces, based on its portfolio at the time.
Bristow said Barrick plans to release 10-year production guidance at its annual general meeting — which is scheduled for May 5 — and is thinking hard about what the company should look like long-term, including its mix between copper and gold production.
“We would invest in copper where it comes with gold, or we would invest in copper where we feel that we have a strategic advantage to outperform the big copper-focused companies,” he said.
In December, Bristow floated the possibility that Barrick could one day pursue a merger with Freeport-McMoRan Inc., the largest publicly traded copper producer. On Wednesday, Bristow said that idea is only at a conceptual stage, but could include anything from a merger to the acquisition of Freeport assets.
Barrick rose 0.7% to $18.58 at 10:21 a.m. in New York, bringing its gain in the past year to 39%.
With the help of asset sales, the company has the potential to reach zero net debt by the end of this year, he reiterated. That would mark a dramatic turnaround for a miner that saw debt swell after a disastrous top-of-the-cycle acquisition in 2011 of copper producer Equinox Minerals Ltd.
Barrick is also benefiting from rising bullion prices, reporting fourth-quarter revenue of $2.88 billion, topping analysts’ estimates. Spot gold averaged about $1 483 an ounce in the fourth quarter, 21% more than a year earlier, and the metal has extended gains this year as the coronavirus weighs on expectations for economic growth.
Higher cash flows allowed the company to boost its quarterly dividend by 40% as it reported adjusted earnings of 17 cents a share for the fourth quarter, beating the highest analyst estimate. That followed a 25% dividend hike in the third quarter.
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