New Barrick chair, Thornton betting on China
Former Goldman Sachs president, John Thornton, will replace Peter Munk as Barrick Chairman on December 4, and is said to be looking to China to help revive the firm’s fortunes.
Barrick says Munk will step down as chairman by 2014 AGM
Barrick’s Peter Munk seeks to regain his Midas touch
Barrick looking for Munk successor
Gold the accepted means of saving your money - Barrick's Munk
Author: Liezel Hill & Matthew Campbell (Bloomberg)
Posted: Monday , 02 Dec 2013
Peter Munk built Barrick Gold Corp. into the world’s largest gold producer by expanding into Africa and South America. Now former Goldman Sachs Group Inc. President John Thornton is betting on China to help revive the beleaguered company’s fortunes.
At a Dec. 4 board meeting, Thornton will be confirmed as Barrick’s next chairman, succeeding Munk, 86, who plans to retire at the Toronto-based company’s next annual shareholders meeting after three decades, according to people familiar with the situation.
Thornton, 59, currently co-chairman, already helps to oversee long-term corporate strategy. As part of that remit, he’s trying to establish partnerships with Chinese companies that may include investment in Barrick and future mining projects, said the people, who asked not to be identified discussing a private matter. China Investment Corp., the country’s largest sovereign wealth fund, is among potential partners Barrick has met with, the people said.
The leadership change at Barrick comes at the end of a difficult year for the company. It has lost 41 percent of its market value in 2013 while debt levels have soared after a slump in gold prices, rising operating expenses and a cost blowout at an $8.5 billion mining project in the Andes.
“Barrick needs to do whatever it can to get its debt paid down,” said Rick de los Reyes, who manages about $1.1 billion at T. Rowe Price Group Inc. in Baltimore. “That balance sheet is going to be a really big problem. "
Barrick has already taken steps this year to cut costs and improve its balance sheet. It raised $3 billion in a share sale last month, using some of the proceeds to repurchase bonds. Jamie Sokalsky, who started as chief executive officer in June 2012, has sold less-profitable gold mines and the company’s energy arm and put other operations under review.
“They have way too many assets and many of them are legacy assets,” Adam Graf, an analyst at Cowen Securities LLC in New York, said in an interview. “They should dispose of those assets and redeploy that capital.”
With Thornton as chairman, there may be more changes ahead. A Wall Street banker without a mining background, he was behind the decision last year to bring in management consultant McKinsey & Co. to help evaluate Barrick’s strategy, according to the people familiar with the situation. While he sees Barrick’s top priority as remaining the leading gold producer, he’s open to a rethink of the entire business, which may involve acquiring mining assets in other commodities, such as copper, they said.
Thornton’s outside perspective may prove to be an advantage, said Don Reed, the CEO of Franklin Templeton Investments Corp., where he helps manage assets including Barrick shares.
“You don’t always have to have tremendous experience at a given company to lead it,” Reed said in an interview.
Thornton sees Barrick gaining an advantage by forming relationships with Chinese companies that can provide capital, engineering expertise and political influence, according to the people. He plans to use his connections to help seal a series of modest deals that may lead to a formalized partnership agreement, they said.
Barrick plans to issue an update after the Dec. 4 board meeting, said Andy Lloyd, a company spokesman.
Thornton spent 23 years at Goldman and was seen as a top contender to succeed Henry Paulson as CEO in the early 2000s, according to “Money and Power: How Goldman Sachs Came to Rule the World” (2011) by William D. Cohan. He departed in 2003 when it became clear Lloyd Blankfein would take the reins, according to the book.
After Goldman he headed to China, helping to start up a business leadership program at Beijing’s Tsinghua University. He sits on the board of China Unicom (Hong Kong) Ltd., the country’s second-largest mobile phone carrier, and is a member of China Investment Corp.’s international advisory board. He’s also chairman of the board of trustees of the Brookings Institution, where he helped establish the John L. Thornton China Center.
That Chinese experience will be valuable at Barrick, said De los Reyes at T. Rowe Price. The country’s economic expansion has made it the largest buyer of commodities from copper to iron ore. China overtook India this year to become the biggest consumer of gold.
Still, gold has slumped 25 percent in 2013 and is heading for its first annual decline in 13 years amid concerns about low inflation and the U.S. Federal Reserve curtailing debt purchases.
Despite that, Barrick is still Canada’s most valuable mining company. It has remained independent while peers Inco Ltd. and Falconbridge Ltd. were taken over by foreign acquirers in the past seven years.
Barrick is also far from the only gold miner to struggle with lower metal prices. The world’s largest gold producers have taken at least $26 billion of writedowns this year while also cutting spending and firing workers amid rising costs.
“That’s not a recipe anyone envies,” Templeton’s Reed said.
Barrick currently operates two copper mines. One of them, Lumwana in Zambia, has disappointed. The mine was acquired when Barrick bought Equinox Minerals Ltd. in 2011 for C$7.3 billion ($6.9 billion). Barrick’s results for the fourth quarter of 2012 included a $3 billion writedown on Lumwana after production costs were higher than expected.
Barrick had another setback in February when talks to sell its African Barrick Gold Plc unit to state-owned China National Gold Group Corp. broke down.
The process foundered as the gold price declined, according to the people familiar with the situation. The experience was frustrating for China Gold. Dealing with Barrick was “like asking a tiger for its own skin,” Tong Junhu, the general manager at the company’s overseas division, said in an interview last month.
Barrick is still open to selling African Barrick, according to the people familiar with the situation. Barrick has already sold three Australian mines this year. The company and Goldcorp Inc., a Canadian rival, are trying to divest their jointly owned Marigold mine in Nevada, two people with knowledge of the efforts said Nov. 14.
Munk, a Hungarian immigrant who escaped the Nazis as a teenager, founded Barrick Resource Corp. as an oil and gas company before shifting to gold in 1983 with his first mine. Barrick has made at least 31 acquisitions since 1994, according to data compiled by Bloomberg. It became the industry leader when it bought Placer Dome Inc. in 2006 for about $10.2 billion including net debt, a record for a gold takeover.
“The ultimate goal is to, in my case, to be the biggest,” Munk said at a May 2011 conference organized by Bloomberg in Toronto. “Why would you be happy with halfway?”
That drive for scale spurred the decision to develop Pascua-Lama, a gold project 4,500 meters (14,700 feet) above sea level on the Argentina-Chile border. The estimated construction cost was $3 billion when development was approved in 2009. Barrick announced the suspension of construction work in October this year following cost overruns and an environmental dispute. By then, the price tag had more than doubled.
Thornton joined Barrick as a director in February last year and was appointed as co-chairman in June of 2012. His $17 million compensation package proved to be controversial. An $11.9 billion signing bonus was described by Canada’s six largest pension fund managers in April as a “troubling precedent.
At Barrick’s annual shareholders meeting that month, a non- binding resolution on executive pay had 85 percent of votes cast against it. Defending his co-chairman, Munk told the meeting that Thornton had useful contacts in China and that Barrick needed him to secure access to governments and protect against resource nationalism, the “ultimate threat to the very lifeline of the mining industry.”
Pay hasn’t been the only focus of investors’ ire toward Barrick. Ontario Teachers’ Pension Plan said in October at least two-thirds of the miner’s board should be independent. Howard Beck, a lawyer, and former Canadian Prime Minister Brian Mulroney, have been directors for 18 years, while Munk’s son, Anthony, has been on the board since 1996.
Barrick said in a Nov, 8 filing it’s considering changes to executive pay and a “rejuvenation” of the board.
“I’d hope that where all this is going to come out is with a better governance process at Barrick, more independent directors, much more attention to having reasonable levels of compensation,” said Michael Sabia, the CEO of Caisse de Depot et Placement du Quebec, Canada’s second-largest public pension fund
British Regulators Said to Be Reviewing Gold Benchmarks
By CHAD BRAY
LONDON – Regulators in Britain are reviewing whether global benchmarks tied to gold trading were improperly influenced as part of a wide-ranging investigation of potential manipulation of the $5 trillion-a-day currency market, according to a person familiar with the investigation.
The review by Britain’s Financial Conduct Authority is in a preliminary stage and it is unclear whether it will ultimately result in any allegations of wrongdoing, said the person, who wasn’t authorized to discuss the investigation publicly.
The inquiry by the FCA is the latest avenue being explored by regulators as they focus on whether traders manipulated a variety of financial benchmarks.
Article ToolsFacebookSaveTwitterE-mailGoogle+PrintSharePermalinkThe FCA declined comment Wednesday.
Those benchmarks, often referred to in the industry as the “fix,” provide a window into spot trading prices at different periods during the day and are often used by fund managers to help determine the value of their portfolios or, in the case of gold, to help set the price of jewelry and other products that include gold.
The benchmark price for gold in London is set twice a day and dates back to 1919, according to the London Bullion Market Association. Barclays, Societe Generale, Deutsche Bank, Scotiabank and HSBC are the member firms that help set the daily benchmarks for gold in London.
Bloomberg News reported the FCA inquiry into gold benchmarks on Wednesday.
The commodities inquiry follows authorities in Europe and Hong Kong who have opened a series of investigations into the foreign exchange market in recent months. The Justice Department in Washington and the Commodity Futures Trading Commission also are scrutinizing trading.
Nine of the largest banks in currency trading have publicly disclosed that they have received inquiries from regulators. As many as 15 banks are under scrutiny, people familiar with the investigation have said.
Twelve traders have been placed on leave pending the outcome of the investigation and several banks are considering limiting the use of chat rooms, which is an area of focus for regulators exploring potential collusion in the market. None of the traders has been formally accused of wrongdoing.
Despite its size, the foreign exchange market is largely unregulated and dominated by banks that control access to information about currency prices. Deutsche Bank, Citigroup, Barclays and UBS account for about half of all trading.
The vast majority of currency trading is conducted out of London, which is still reeling from a long-running investigation into alleged manipulations of the London interbank offered rate, a global benchmark interest rate known as Libor.
Five financial companies, including Barclays, Royal Bank of Scotland and UBS, have paid more than $3 billion in the Libor scandal in total. Several of those banks are now under scrutiny in the currency investigation.
BEIJING | Wed Oct 23, 2013 7:19am EDT
BEIJING Oct 23 (Reuters) - China's property sector borrowed more from banks in the third quarter than in the second, a Reuters calculation from central bank data showed, another sign of buoyancy in a red-hot housing market.
Chinese banks lent 600 billion yuan ($98.47 billion) to home buyers and property developers between July and September, higher than the second quarter's 589.7 billion yuan and up 44 percent from a year ago.
Solid demand for property loans is in line with strong recovery momentum gripping China's housing market since the start of 2013. Data this week showed home prices rose by their most in nearly three years in September.
Exuberant home prices well beyond the reach of ordinary people suggest China's four-year campaign to calm its housing market has had limited and uneven success.
For the first nine months, total property loans issued hit 1.9 trillion yuan, up 917.6 billion yuan from a year ago, the central bank said on its website.
Outstanding mortgages by the end of September werer up 21 percent from a year ago, at 9.47 trillion yuan, while outstanding loans to developers climbed 15 percent to 3.43 trillion over the same period.
China home prices rise by a record in four major cities
Shanghai's new home prices rose by 17% in September
22 October 2013 Last updated at 00:52 ET
China's four major cities saw record rise in new home prices in September, stoking fears of a housing bubble.
Prices in Beijing, Shanghai, Shenzhen and Guangzhou saw their biggest jump since the government changed its calculation method in January 2011.
Property remains a popular investment choice in China and prices have now risen for nine months in a row.
Analysts say Beijing has so far held back on imposing fresh curbs due to concerns over slowing economic growth.
However, data released last week showed that China's growth rate picked up in the July-to-September period - the first rise in three quarters.
Many believe that with the economy picking up and property prices continuing to rise, policymakers may soon implement measures to control speculation in the sector and also keep price rises in check.
Data released by the by China's National Bureau of Statistics on Tuesday showed that new home prices rose in 69 of China's 70 major cities in September.
In the capital city of Beijing, new home prices were 16% higher in September than they were a year earlier. In Shanghai, prices rose by 17% compared to a year earlier.
The southern manufacturing-based cities of Shenzhen and Guangzhou saw prices rise by 20%.
The eastern city of Wenzhou was the only Chinese city to post a decline. Prices fell by 1.7% from last year.
President Obama is rejecting a key element of House Republicans latest proposal to extend the federal debt ceiling, opposing a linkage between a short-term increase and negotiations on the budget, White House spokesman Jay Carney said Friday.
Briefing reporters after financial markets closed for the week, Carney welcomed a “new willingness” among congressional Republicans to open the government and avoid default, but he said the president would not agree to tie budget negotiations to a six-week debt-limit extension.
Earlier Friday afternoon, Obama spoke by telephone with House Speaker John A. Boehner (R-Ohio), and the two agreed that they should keep talking, aides to both men said without providing additional details. That conversation came hours after a meeting between Obama and Senate Republicans at the White House. Obama met with 20 House Republicans on Thursday.
[Read the latest updates on the shutdown and debt crisis.]
Carney praised House Republicans for what he described as a “recognition that we need to remove default as a weapon in budget negotiations, that the threat of default should not be used, and certainly default itself is never an option.”
“The president appreciates the constructive nature of the conversation and of the proposal that House Republicans put forward,” Carney told reporters. “He has some concerns with it.”
Carney said: “A proposal that puts a debt-ceiling increase at only six weeks, tied to budget negotiations, would put us right back where we are today in just six weeks, on the verge of Thanksgiving and the obviously important shopping season leading up to the holidays. And that would create enormous uncertainty for our economy.”
Owners of small businesses, in a separate meeting Friday with Obama, told him that a continuing threat of default heading into the holidays “would be very damaging to them,” Carney said. “And we don’t think that’s the right way to go.” He added: “It is our view that we cannot have a situation where the debt ceiling is extended as part of the budget negotiation process for only six weeks.”
“What we think is not the right way to go is to try again to link extension of the debt ceiling to budget negotiations, and therefore link the possibility of default to whether one side gets what it wants in those negotiations,” Carney said.
He spoke after some Senate Republicans expressed optimism Friday that a short-term deal can be reached soon to raise the federal debt limit and end the government shutdown. GOP participants said a midday meeting at the White House with President Obama was constructive even though it produced no immediate breakthrough.
The meeting came after House Republicans late Thursday submitted a revised short-term proposal to raise the debt ceiling and reopen the government, offering Obama another option amid the first signs of bipartisan progress on the issues.
Returning to the Capitol after the meeting, Republican senators described a substantive session with the president that was focused as much on a larger conversation about the nation’s fiscal problems as on a negotiation over how to reopen the government and raise the debt ceiling for just a few weeks.