Mark Bristow, officially installed as president and CEO of Barrick Gold (TSX: ABX; NYSE: GOLD) on New Year’s Day, sat down with The Northern Miner for a fireside chat at The Northern Miner’s Canadian Mining Symposium at Canada House in London, U.K., on May 22, 2019, to talk about his vision for the company and the gold mining industry more broadly since Barrick’ blockbuster merger with Randgold Resources — the smaller, African-focused gold miner he founded and led until the merger.
The Northern Miner: You’ve been a critic of the gold mining industry for many years. You said it was undisciplined and there was poor return on invested capital, but Randgold Resources was always an outlier. You always focused on the geology; it was always about the orebody. And your guiding principle was that an orebody had to have at least 3 million ounces of gold and an internal rate of return of 20% at a long term gold price of US$1,000 an ounce. Now that you’re heading up the bigger company, Barrick Gold, with assets all over the world and its own challenges. How do you see that going forward? Do you have your different strategic filters at Barrick than you did at Randgold?
Mark Bristow: We’ve introduced as part of this transaction (the idea of) tier one assets — which is effectively around the top 10 assets in the world.
When you look at a 15% return at a US$1,200 per oz. gold price, a lot of people in this industry don’t know what it takes to make a 15% return.
Because if you have a 7 million oz.-plus gold deposit that produces 400,000 oz. a year, and you have to invest US$2 billion to bring it to account to reach 15% return, you’ve got to have US$570 per oz. all-in-sustaining cost.
So to get up to 20% when you’ve got very big assets is difficult, but it’s still a discipline and anyone who can deliver 15% real returns — after tax for Canadians, because you always use before tax numbers — it’s a world class asset and we need more of those.
And the principle of any mining is, your revenue is in your orebody. If you start with a high quality orebody, it doesn’t have to be high grade; it can be lower grade in a pit with no strip ratio.
But if it’s a high quality orebody, you’ll always end up with a better return.
if I was going to invest in a mining company, I’d buy it
If you start with a really underwhelming orebody, you’re never going to make any money. You’re going to do what the industry is very good at: You’re going to do really reasonably well in the peaks of the cyclical market and you’re going to go bust in the trough.
The point is that you can’t get there if you don’t have partnerships with your various stakeholders, whether they are governments or investors, fund managers.
I’ve always said that we’re in an industry which is by …read more