New Focus for Mining

Led by the CEOs of Anglo American and Barrick Gold, senior mining executives join widespread criticism of the industry's financial and ESG performance, and urge a 'new beginning' for the sector.

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The performance of the mining industry was attacked by a swathe of speakers at last week's Mining Indaba conference in Cape Town. In addition to NGOs and African politicians, several senior mining executives were critical of their peers with regard to financial performance, and to environmental, social and governance issues.

The chair of Gold Fields Ltd, Cheryl Carolus, for example, told delegates that "globally, the extractive sector can do better" and stressed it must "avoid its adversarial positioning". The CEO of Anglo American Plc., Mark Cutifani, agreed, saying that mining needs to be "reimagined", which will start with safety and health, and focus on social issues and the environment. We must "work together", he said, "to create a new mining industry".

Mr Cutifani argued that "local communities are the industry's single most important stakeholder", and advocated "looking at new social contracts". He warned that, otherwise, transgressing mining companies will become the next Kodak or Blackberry. He stressed that mining companies must help local communities create sustainable jobs, for example through access to mine infrastructure. We must, Mr Cutifani said, "turn mining from a negative to a positive experience".

The most impassioned attack from mining executives came from the new CEO of the recently enlarged Barrick Gold Corp. Mark Bristow renewed his long-standing criticism of the mining industry's financial performance, telling delegates "the bulk of the industry still fails to deliver value for its long-suffering shareholders".

Mr Bristow took over the helm of the Toronto-based company on January 2 (five days before his 60th birthday) after completion of the US$6.5 billion takeover of Randgold Resources Ltd, which he had led since 1995.

Mr Bristow noted that gold had outperformed all other major asset classes since 2000 (saying "it is indeed a precious metal") but gold equities have not followed the metal since 2011. Industry has "destroyed value", he said, and blamed "chronic short-termism by miners and their host countries". He urged a change in the mindset of mining companies, investors and national governments — all succumb, he said, to the desire for instant gratification, whether by high grading their deposits, demanding a premature increase in dividends or by increasing tax rates.

Mr Bristow sees Barrick as the new "value champion" of the gold sector. His mission has started well, with the company's market capitalisation rising by over 48% in January (ie since closing its amalgamation with Randgold) to reach US$23.4 billion. This makes it the industry's eighth largest company, according to S&P Global Market Intelligence.

Mr Bristow said Randgold 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. He reminded delegates that when Randgold was delisted at the end of December, it was the best performing FTSE 100 company of the past 20 years.

Since the merger, Mr Bristow has started applying Randgold's proven strategy to his new global group. He is confident that the process of rightsizing the business and increasing efficiencies "will soon result in us earning our place as the industry's most valued company".

The enlarged Barrick, one-third owned by the former shareholders of Randgold, already operates five Tier 1 mines. However, Mr Bristow described the company as under-resourced in North and South America, "so we will be focussed there". He also confirmed that Barrick will be looking in addition at copper assets.

Nevertheless, before Barrick can become a champion of the industry, Mr Bristow must overcome some historical baggage. Top of this list is the company's 64% subsidiary Acacia Mining Plc. The UK-listed company's Tanzanian gold mines accounted for almost 9% of Barrick's revenue in 2017 but is embroiled in a tax dispute with the government, corruption investigations and human rights abuses at its North Mara gold mine.

Four years ago Mr Bristow abandoned a joint venture in Ghana with AngloGold Ashanti because the mine was "in conflict with everyone" and "did not have a social license to operate". Analysts assume that he believes Acacia's flawed social license is recoverable, but investors will expect Mr Bristow to tackle quickly these challenges in East Africa. He, and the mining industry generally, are under the microscope. 

Chris Hinde

Chief Commentator, Mining Beacon

Previously editorial director of Mining Journal, and more recently head of S&P Global Market Intelligence's metals and mining team, Chris is now Mining Beacon's editor-in-chief and lead commentator. He posts two blogs every week, one on Monday reviewing market conditions over the prior week, and a second on Thursday looking at issues on the global mining scene. There is also a quarterly blog on business opportunities in the sector.