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Barrick's reserve growth means it won't be 'forced' into M&A, CEO says

Randgold Resources Ltd. Chief Executive Officer Mark Bristow Interview
Randgold Resources Ltd. Chief Executive Officer Mark Bristow Interview

Barrick Gold Corp.’s chief executive says some of the world’s biggest resource companies have been “forced” into mergers and acquisitions after failing to grow their reserves, but that he doesn’t feel compelled to follow suit.

Mark Bristow, head of the world’s second-largest gold miner, believes Barrick has the luxury of sidestepping that trend because of its focus on growing through exploration in recent years.

“If there is one thing that sets Barrick apart, and I know it’s not snazzy and it doesn’t require M&A and all that other stuff, it has been our ability to deliver sustained and significant growth in our reserves,” Bristow said. “We have replaced 125 per cent of the gold that we have mined … many of our peers have been forced into M&A because they haven’t been able to replace the ounces that they have mined.”

The mining industry has seen significant consolidation in the last year as prices have rise and mineral deposits have become depleted.

The series of deals started late last year, when Yamana Gold Inc. agreed to sell itself to two Canadian rivals, Agnico Eagle Mines Ltd. and Pan American Silver Corp. for US$4.8 billion.

Then, in May, Newmont Corp., the world’s largest gold producer and a rival to Barrick, announced  that it had inked an agreement to take over Australia’s largest gold company, Newcrest Mining Ltd. In addition, mining giant Glencore PLC. is attempting to buy Canada’s largest diversified miner, Teck Resources Ltd., although the latter has twice rejected Glencore’s offers.

Barrick, on the other hand, has been looking to explore non-traditional mining areas such as Saudi Arabia and Pakistan for copper and gold. Bristow added that the company’s geologists were “pointing to some real opportunity to expand” in Canada as well.

Bristow expects Barrick to play a key role in the production of copper, a metal that’s considered to be important for the energy transition away from fossil fuels. He said that Barrick’s assets are “in a better league” compared to other copper mines that were built decades ago due to better grades and the availability of gold with copper, which “blends the risk” and makes it attractive.

The miner beat earnings expectations for the second quarter despite a drop in profits due to lower production and higher costs, it reported Tuesday. The Toronto-based company earned US$305 million in net income for the quarter that ended on June 30, a 38 per cent drop from US$488 million during the same period a year earlier, while revenue dipped by one per cent to US$2.83 billion from US$2.86 billion last year.

Last quarter, the company churned out three per cent less gold and 11 per cent less copper year over year, while the cost of sales rose by nearly five per cent to US$1.94 billion versus US$1.85 billion a year earlier.

The company’s shares were trading down 0.22 per cent at $21.99 Tuesday afternoon on the Toronto Stock Exchange. The company’s 52-week price ranges from $17.88 to $28.19.

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