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Barrick in talks on further asset sales, no spin-offs

Jamie Sokalsky, CEO of Barrick Gold, speaks at the Denver Gold Forum industry conference in Denver September 24, 2013. REUTERS/Rick Wilking
Jamie Sokalsky, CEO of Barrick Gold, speaks at the Denver Gold Forum industry conference in Denver September 24, 2013. REUTERS/Rick Wilking

By Allison Martell

DENVER (Reuters) - Barrick Gold Corp , whose shares have been beaten down in recent months by a series of writedowns and project delays, is in talks on further asset sales, with the focus on divesting smaller, higher-cost mines, Chief Executive Jamie Sokalsky told Reuters on Tuesday.

Barrick announced a deal last month to sell three of its high-cost mines in Australia for $300 million. The world's largest gold producer is looking to improve returns in the face of weaker metal prices and ballooning costs.

Sokalsky said Barrick could sell more mines, especially those that are relatively high cost, have shorter mine lives and limited opportunity to expand. Some of Barrick's remaining assets in Australia fit that profile, he said.

"There's quite a level of interest, even though as I've said it's a buyer's market," Sokalsky said, speaking on the sidelines of the Denver Gold Forum in Colorado. "We're getting unsolicited inquiries from quite a number of parties."

Barrick owns 24 mines around the world and plans to produce more than 7 million ounces of gold this year. By selling non-core assets, management can focus on richer, long-term projects, like the Cortez mine in Nevada, Sokalsky said.

"This isn't about going from 24 to five or six, but it is an optimal point somewhere in between, I think," he said.

Barrick also sold its energy businesses for about C$455 million ($441.77 million) earlier this year.

Gold prices have fallen more than 20 percent so far this year, putting pressure on miners to clean up balance sheets and cut costs to improve profit margins.

Some analysts have suggested Barrick should spin off assets instead of selling them into a tough market. In 2010, it spun out numerous African mines into African Barrick Gold PLC , in which it retained a majority stake.

Barrick has since been shopping around that stake. A deal to sell it to state-owned China National Gold Group fell apart in January when the two sides failed to settle on a price.

Sokalsky said Barrick is focused on improving operations at African Barrick, not on a quick sale, and it does not have a timetable for divesting its stake.

He said more spin-offs are not on the agenda, given tax considerations and administrative requirements.

"For us, it would be better to exit simply, take the cash and move on," he said.

Barrick shares closed up 1.4 percent at C$19.14 on the Toronto Stock Exchange. The stock fell as low as C$14.22 in July, the lowest point since May 1992.

BOARD REVAMP

Barrick has struggled in recent years with sky-rocketing development costs, project delays, the slumping gold price and a series of multi-billion dollar writedowns, leading some investors to call for change at the board level.

Some investors have complained that the board does not have enough expertise in geology or mining engineering, and is too closely aligned with founder and chairman Peter Munk.

Earlier this year, a group of Canada's top pension funds, small but significant Barrick shareholders, rallied against the company's executive compensation plan.

Sokalsky said the company is listening and is looking at adding new independent directors to its board.

"They're taking it very seriously," he said. "We'll hopefully be able to update investors and the public on the process by the end of the year."

Asked whether an update would include announcing the name of a new director, he said it could, but not necessarily.

($1 = 1.0300 Canadian dollars)

(Writing by Julie Gordon; Editing by Gerald E. McCormick, Leslie Adler and Bob Burgdorfer)

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