Investors are undermining the gold industry’s ability to grow by demanding a bigger share of profits from high bullion prices, according to the CEO of the world’s second-largest producer.
“Fund managers just bash the table and want money — they’re not interested in this industry reinforcing its foundations,” Barrick Gold Chief Executive Officer Mark Bristow said in an interview Wednesday. “Then they turn around and get hysterical when a host country demands returns.”
While Toronto-based Barrick is returning a sizable chunk of earnings and divestment proceeds to shareholders, Bristow urged fund mangers to take a longer-term approach to generating returns for their customers. Miners have to navigate tricky jurisdictions and geologies as well as gain the trust of politicians and populations at a time of rising environmental standards, he said.
It’s not the first time the investment community has resisted growth at times of high prices and earnings. Fund managers took some convincing on Barrick’s 2018 tie-up with Randgold Resources, which kicked off a flurry of deal making in the industry, Bristow said.
That wave of consolidation has since stalled, “and all we’ve got from the market is ‘returns, returns, returns,’” the CEO said by phone from South Africa.
Those calls are also heard by host nations, he said, some of which are now looking for a bigger slice of the mining windfall as prices of industrial metals such as copper surge to the highest levels in a decade.
Copper is benefiting from the global economic recovery and concerns that supply will struggle to keep up with demand growth driven by the clean-energy transformation. Gold, on the other hand, has gotten back toward $1,800 an ounce amid signs of inflationary pressures and weakness in the U.S. dollar.
Bristow sees gold supported by “irrational” behavior in response to a pandemic-stressed global economy that threatens the value of paper money. The pandemic has also exacerbated economic inequalities as more vulnerable people lose their incomes and more secure people get wealthier, he said.
Mining has a role to play in alleviating poverty and rebuilding economies and infrastructure, but it has to be acceptable to future generations, he said.
“I’m cautioning people not to become too obsessed with stripping the industry out of its cash, and not allowing strengthened balanced sheets to be built and investments in the future,” he said. “Whether it’s exploration or deal making, it’s got to create value and you can’t create value as a mining executive if you don’t have support from the fund managers.”
(By James Attwood, with assistance from Daniela Sirtori-Cortina)