Company founder Peter Munk said that Barrick is “fully committed to maximizing shareholder value, but have been disappointed with our share price performance.” That’s why Regent is gone and Sokalsky is in. Just how bad has Barrick performed under Regent?
Regent became CEO in January 2009. Since then the company’s share price has risen about 28%. In the same time period, shares of Kinross Gold Corp. (NYSE: KGC) are down -51%, shares of Goldcorp Inc. (NYSE: GG) are up 48%, Yamana Gold Inc. (NYSE: AUY) is up 129%, Newmont Mining Corp. (NYSE: NEM) is up about 39%, and Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) is up 127%.
The average gold price in 2009 was $1,087.50/ounce, and the yellow metal closed yesterday at $1,616.90/ounce, a gain of about 49%. Clearly Barrick’s board believes that the company’s share price gains should match up more closely with the price of gold. Tye Burt, President and CEO at Kinross since 2005, may also have something to worry about if share price accountability becomes the new vogue for gold miners.
As for Barrick and Sokalsky, the new CEO is a finance guy, not a mining exec. Regent was also a finance guy, but he had served as president and CEO of a mining company before arriving at Barrick. The company’s problem is that costs keep rising: in 2011, cash costs for gold production reached $460/ounce and Barrick expects that to increase to $520-$560/ounce this year. Sokalsky is going to have to deal with that either by cutting workers, lowering fuel costs, or mining higher quality deposits. Which do you think is easiest?
Barrick’s shares are up about 1.3% in pre-market trading at $42.61 in a 52-week range of $34.82-$55.95.
Paul Ausick
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