CAPE TOWN (miningweekly.com) – Mark Bristow, the president and CEO of gold producer Barrick Gold has accused mining companies, investors and host countries of succumbing to the desire for instant gratification and for not investing deeply in the industry.
He called for a mindset change in an industry that has been plagued with "chronic short-termism", particularly over the past five years.
“We need a change in the mindset of miners, investors and host countries . . . all of whom to one degree or another have succumbed to the desire for instant gratification,” Bristow told the Investing in African Mining Indaba, in Cape Town, on Tuesday. He explained how the different stakeholders were involved.
“You have a tough balance sheet . . . a difficult year, and you increase the taxes. You are motivated by a bonus that requires production, so you high grade your mines.
"As an investor, you demand dividends before the investment has arrived and has started to deliver value. We have seen it over the past five years.”
Bristow called for long-term value creation and investment in the gold mining industry.
He said gold mining had outperformed all other major asset classes, including equities since the turn of the century.
“Gold is indeed a precious metal, particularly for those African countries fortunate enough to possess this resource. If the gold price has gone up, you would think gold mining equities would follow the higher gold price, but the opposite has happened. Instead of creating value, the industry has destroyed it.”
He said it was imperative to keep investing in gold mining, being a consumptive industry.
“If you don’t replace things and you just keep mining what you have left, then you have to expand the capacity of your processing plants, so that you can still mine gold, and increase your production, but if you do that with lower grades, you can’t make money unless the gold price keeps going up.”
Bristow said a lack of foresight in the industry had resulted in fewer significant discoveries. Most discoveries have been in emerging markets, particularly in Africa, yet investors often tended to leave Africa and move to "safe places".
“But as we all know, if you want to search for elephants you have to go to elephant country and when it comes to mining, and particularly gold mining, Africa is elephant country.”
He said mining companies needed to face up to the risk of operating in infrastructure-challenged places, and to invest in local skills.
“This concept of expatriate workforces in Africa is not a sustainable solution to our mining problems.”
He said it was vital to invest in local skills.
“This will create value for your stakeholders – your shareholders, but equally the host country, government and communities around our mines and the citizens in the countries in which we operate, who have a right to participate not only as workers, but also as executives and managers.”
Bristow said Randgold Resources, which had merged with Barrick in December, was a prime example of what could be achieved by focusing on long-term value creation and through investing in people, partners and host countries as well as in exploration and development.
“When we delisted it on the first of January, it was the best performing FTSE 100 company in the last 20 years.”
“This is one of the first deals for many years where the investment is inward to Africa, rather than a sale where the owners leave this continent,” said Bristow.
Since the merger, Bristow said he was in the process of rightsizing the business and increasing efficiencies.
“In the short time we have been together, the combined team has already made great progress in applying Randgold’s proven strategy to a new global group. I am confident this will soon result in us earning our place as the industry’s most valued company.”
Bristow said Barrick’s portfolio spanned all of the major gold belts and held five of the world’s top Tier 1 mines. He said that while the company was balanced in Africa, it was under-resourced in North and South America, and would be stepping up investment there.