Barrick’s Bristow: Gold Industry Still Needs More M&A Activity

M&A activity in the gold space has been strong over the last couple of years, but Barrick’s (TSX:ABX,NYSE:GOLD) Mark Bristow believes more consolidation is still needed.

“The industry has gone a long way from where it was in just 18 months,” he said during a Q&A session at the Denver Gold Forum, the latest industry event to go online.

“The problem now is that — my issue is — we haven’t finished that job. This industry has still got a mishmash of assets and too many managers’ hands, and it needs further consolidation.”

The latest round of gold M&A was arguably kicked off at the Denver Gold Forum two years ago, when Barrick and Randgold Resources announced plans to join forces.

The so-called mega merger received mixed reactions from gold market participants, but ultimately was followed by a slew of transactions in the gold market, including Newmont’s (TSX:NGT,NYSE:NEM) blockbuster acquisition of Goldcorp in 2019.

The new versions of both Barrick and Newmont eventually joined forces last year through Nevada Gold Mines, a joint venture that combines the companies’ respective Nevada operations — but only after Barrick launched a failed attempt to acquire Newmont.

While companies of course are generally the drivers of M&A transactions, Bristow emphasized in the Q&A that he believes investors need to give their support to this activity too.

“It also needs a commitment from investors, because without investors you can’t do much,” he said, explaining that support was not immediate when Barrick and Randgold first started to talk about consolidating and rearranging the industry. “A lot of investors were not quick off the mark to support those initiatives, (but) they’ve seen the benefits today and it couldn’t have been a better-timed decision.”

As another example, Bristow pointed to Kirkland Lake Gold’s (TSX:KL,NYSE:KL,ASX:KLA) acquisition of Detour Gold. “It was a great transaction,” he said. “It didn’t get a lot of support initially from the investing community, (but) I think there’s a couple more transactions like that that should happen.”

Bristow was relatively tight-lipped on any future deals Barrick may do, saying only that the company is singleminded in its focus on tier one assets.

“We think that the industry could be better served, and its investors, if we could reallocate some of these assets into the right place jurisdiction-wise, with management (teams) that have proved track records of being able to deliver value,” he explained. “And so wherever we can we’ll encourage, and wherever we see opportunities to add to our tier one portfolio we’ll be right there in front of the queue.”

Much of the Q&A focused on what Barrick is doing at its assets around the world (a topical issue right now), but Bristow also commented briefly on the value of generalist investors in the gold space, saying that his focus has always been to have “a simple business like any other global business” — in other words, a business that makes sense to generalists and specialists alike.

“Randgold had a very broad generalist investor base, (and) if you look at our top investors today, when we meet with them we’ve got more generalist portfolio managers in the call than specialist metal or mining managers or analysts. And that works really well,” he said.

Barrick’s best-known generalist investor right now is Warren Buffett’s Berkshire Hathaway (NYSE:BRK.A,NYSE:BRK.B), which recently invested around $560 million in Barrick.

“I’m pleased to see the likes of Berkshire Hathaway taking an investment,” said Bristow.

“We value and celebrate every single generalist fund that buys our stock — in fact, we do for anybody who buys our stock — and you know we’ve had some very strong generalist support through the transaction as well. I’m excited about it.”

Want to hear more from Bristow? Click to read our coverage of his talk at last year’s Denver Gold Forum.

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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.