Letter from the Executive Chairman
John L. Thornton
In the months since last year’s Annual Meeting, events around the world have only reinforced our assertion that “gold is here to stay.”
While the future of the global economy is always uncertain, it is clear that economic and geopolitical instability are currently on the rise, with growing risks of protectionism, trade wars, and international conflict. Deeper secular trends, particularly changes in the structure of labor markets and slowing economic growth, have gone unattended. There are even economic historians such as Robert Gordon, who believe that the high growth rates seen from 1870 to 1970 were anomalous and cannot be reproduced, which, if correct, would likely inflame populist anger, as expectations of ever-increasing prosperity are disappointed. Meanwhile, we
are seeing the return of the East Asian savings glut that created some of the conditions for
the financial crisis.
Regardless of whether these trends persist over time or evolve in unforeseen ways, global volatility and uncertainty remind us of gold’s essential function as a store and unit of value—but they also add greater complexity and risk to our business. In the face of these challenges, we believe we will succeed by being true to ourselves. It is the things that make Barrick distinctive that will allow us to create long-term value per share for you, our fellow owners,
no matter the global environment.
First, our partnership culture gives us an authentic, distinctive, and sustainable competitive advantage. The decentralized operating model that goes along with it ensures continual improvements in efficiency and productivity. We trust our mine leaders to run their businesses safely and efficiently to maximize free cash flow and long-term value; problems are solved locally and quickly. Meanwhile, our head office leaders focus on allocating capital, both human and financial, and on setting strategy. Externally, our dedication to partnership should make us the partner of choice for host governments and communities, NGOs and indigenous groups, as well as other mining companies.
Partnership also means being a company of owners. Last year, we created a program to make all our people owners, with shares in the Company. As far as we know, the program is the first of its kind, and it is producing a true culture of owners. Owners take responsibility, hold each other accountable, work with a sense of urgency, and always seek to improve. They are all in.
Second, we have instituted an approach to capital allocation that is robust, transparent, and reliable. Our overarching goal is to grow free cash flow per share no matter the price of gold. All prospective investments—whether external acquisitions or internal allocations for exploration, expansion, or other projects—compete for capital. They must meet our stated target of a 10-15 percent return on invested capital through the metal price cycle, align with our strategic goals, undergo rigorous risk assessments, and be able to grow our free cash flow per share, now and over the long term.
Our leaders at our head office devote the greater part of their time to the allocation of capital and people. We created a new role that is a first in our industry: a Chief Investment Officer, who ensures that the same standards, scrutiny, and rigor are applied consistently to every potential investment. We appointed Mark Hill to the position. Mark previously led the Evaluations group at Waterton Global Resource Management, a private investment firm with an outstanding track record of capital allocation—expertise he combines with earlier experience at Barrick.
Third, we are becoming a talent-obsessed firm, as all high-performance organizations are. When I became Executive Chairman, the first appointment we made was to elevate Darian Rich to the position of Executive Vice President, Talent Management. Talent is the first topic at our weekly Executive Committee meetings. Over the past year and a half, nearly every one of our mine general managers has rotated into a new role. We are tapping into all sources of talent—we recruit highly skilled military veterans, frequently with a special forces background, young minds with a Silicon Valley background, top talent from across the mining industry, and the best students from leading universities around the world.
Finally, we mean to be a leading twenty-first-century company, in any industry or region. We are embracing innovation across our business. We created the position of Chief Innovation Officer—another novel position for the mining business—and filled it with Michelle Ash. Michelle has a passion for challenging the status quo, with more than 20 years of international experience at leading companies in the mining and manufacturing sectors. She and her team are exploring approaches that will be fundamentally disruptive to the mining industry.
A current example is our digital transformation in partnership with Cisco. The initiative is being led by Ed Humphries, whose background in military special forces ensures a focus on rapid implementation and high-level execution. The world has been changing much faster than the world of mining, and we intend not merely to catch up but to lead it. We will embed digital technology into every fiber of our business, which will allow us to be even more transparent with, and accountable to, our host government and community partners. We will be able to identify and mitigate problems the moment they arise. We will use data and artificial intelligence to make better predictions, on everything from weather conditions to the timing of equipment maintenance. We will continuously lower costs through greater speed, efficiency, and productivity. We will improve worker safety and comfort, which among other things will mean we will continue to attract the best miners and managers in the world. And we will unlock value in places and ways that no other mining company will be capable of doing.
While we remain vigilant in the face of risks and disciplined in our digital investments, we are also optimistic about digital technology’s potential to transform every dimension of our business and to enable us to redefine the nature of mining. In the twenty-first-century mining we envision, almost no one ventures below ground, a host of performance metrics are available in real time to everyone at the Company and to all our external partners, and we use artificial intelligence for the continual improvement of
our operations and management. Just as importantly, our people will have opportunities for ongoing learning and growth, as they adapt to the latest technologies and devise ever more ingenious ways of using them productively. Digital technology will not replace our workers—it will empower them.
As we evolve and embrace the new, we will always hold fast to the core principles that make us who we are: operational excellence; a robust balance sheet; disciplined financial management in accordance with strict hurdle rates; an obsession with talent; deep emotional and financial ownership on the part of all our people; and a relentless commitment to execution at
the highest level.
The world is changing faster than ever. We will change with it—adapting to it, mitigating its risks, and seizing its opportunities. Throughout it all, we will remain true to who we are, and we will always work tirelessly to create long-term value per share for you, our fellow owners.
John L. Thornton