Consolidation in the gold sector is not yet complete, and Barrick Gold Corp. is well positioned to play a part in future developments, Barrick President and CEO Mark Bristow said on a Feb. 18 earnings call.
To support his suggestion, Bristow pointed to the company's zero net debt, record annual free cash flow of $3.36 billion and a recently upgraded credit rating of Baa1 from Moody's Investors Service. The company has made substantial progress toward its goal of building a business capable of delivering the best returns in the industry, the executive added.
"The dividend has tripled, cash flows have increased to record levels, and the once crippling debt burden has been lifted," Bristow said.
Barrick's 2020 net earnings fell to $2.32 billion, or $1.31 per share, from 2019 net earning of $3.97 billion, or $2.26 per share.
The company met production targets and advanced other corporate goals despite many obstacles: the COVID-19 pandemic, a military coup in Mali, a financial meltdown in Argentina and challenges with the government of Papua New Guinea. Higher gold and copper prices boosted the company's annual net operating cash flow by 91.2% to $5.42 billion and adjusted net EPS by 125.5% to $1.15. The company also reported progress on several large capital projects during the period.
Barrick announced Feb. 18 that it plans to distribute $750 million in capital returns from the $1.5 billion in proceeds it earned from the sale of its 50% stake in the Kalgoorlie gold mine in Western Australia and other divestments. While some in the market are insisting more money be returned to shareholders, Bristow noted that many companies are "harvesting" cash rather than investing back into the enterprise.
"This is a cyclical business," Bristow said. "We're up there near the top of the cycle, and managing this requires some conservatism and considered decisions."
He warned that, like 2017 and early 2018, the gold industry is in a precarious position but is not as visible due to higher margins brought on by the elevated gold price. A lot of companies are using the pandemic and a higher gold price to avoid the conversation around industry consolidation, he added.
"Suddenly, everything is utopic with a higher gold price," Bristow said. "That doesn't change the long-term profitability of our industry."
Bristow added that while there is still technical support for a strong gold price embedded in the market, Barrick does not see the short- or near-term outlook for gold markets as being clear at the moment. The best way to grow for now is to do so organically, he said. Barrick has real upside in terms of new discoveries and brownfield extension opportunities at "every single core asset" in its portfolio, Bristow said.
Asked specifically about the company's interest in expanding its copper business, Bristow said Barrick would not be buying the first copper asset or company to come along just to broaden its footprint.
"We've got too many checks and balances in my executive team to go out there and do something stupid," Bristow said. "So, watch the space, give us time. We'll keep building our business in a considered way."
