Barrick’s Peter Munk’s birthday not the happiest one

One of Canada’s most important entrepreneurs, Barrick Gold’s founder and chairman Peter Munk is turning 86 today, at a time of major challenges that both the mining industry and his endeavour turned-world’s largest gold company are being forced to face.

A refugee from the Nazis in 1940s Hungary, and a trained electrical engineer, he made Toronto his home, becoming a well-known philanthropist in Canada and an influential businessman. But as his career draws to a close, he has been facing increasing criticism from Barrick (TSX, NYSE:ABX) shareholders, who are demanding a boardroom renewal.

After months of declining gold prices, a second-quarter loss of $8.6 billion and project writedowns of over $13 billion so far in 2013, Barrick’s stock is trading around the $19 mark, making it one of the worst performers in the sector this year. The company has slashed its dividend by 75% and has vowed to cut costs by selling non-core assets and reducing its workforce.

Being the most debt-heavy company in the gold sector has meant for Barrick to be among those that have lost the most due to volatile bullion prices.

“The company has never been known for managing its cash or resources well or, for that matter, being investor friendly,” writes Steve McDonald, bond strategist for The Oxford Club.

“It has a history of being too aggressive in its growth efforts and having too many underperforming assets that are too spread out,” he adds.

But in an open letter to The Globe and Mail last September, Munk responded to his critics:

Barrick’s Peter Munk’s birthday not the happiest one“I have always placed a great deal of importance on my relationships with Barrick’s many shareholders, and was gratified that some 83 per cent of all the shareholder votes cast at Barrick’s most recent annual meeting were in favour of my re-election as a director,” he wrote.

Under Munk’s direction, Barrick has become one of the most successful companies in Canada, and one of the world’s largest and most profitable gold producers. In its 30 years of life, the company has established operations in five continents, employing over 25,000 people.

Barrick’s latest performance, however, seems to have tarnished the company’s positive record, giving critics reasons to ask for Munk and other high officers’ heads.

Ironically, a sour end like that would be something that Barrick’s chairman would somehow expect, and perhaps even wish. As he said 17 years ago in his authorized biography The Making of a Modern Tycoon: “If you want to dream big, expect big problems (…) Big dreams challenge the fates.”

Image of Peter Munk at Davos 2010, by David Akin via Picassa.

 

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