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2018 Annual Report
John L. Thornton
John L. Thornton

Message from the Executive Chairman

John L. Thornton

In my message to you last year, I noted that we operate in a world which is not only increasingly complex but changing in unpredictable ways and at an accelerating rate.

Since then, it has become even more so, posing a particular challenge for mining companies — long-term businesses which have to plan for and invest in a future where the certainties are shifting and the risks are great.

The mining industry has generally struggled in these circumstances to devise and execute strategies capable of delivering real, sustainable value. Learning from our own experience in this regard, Barrick launched a new strategic initiative in 2015, designed to reinvent the business in order to secure its long-term success. We called it “Back to the Future” because while it looked to new horizons and the ridges that will rise beyond them, it was based on the values on which Barrick’s original ascendancy was built.

Over the past year, we have continued to make significant progress with this transformation process. Our portfolio is being enhanced through a renewed focus on quality assets with good growth prospects and the disposal of those deemed to be non-core. The balance sheet has been restored to a position of strength and the business model has been recalibrated with returns, margins and free cash flow as its key criteria. We have continued to decentralize management. The aim is a smaller corporate office; senior operational executives moving to the mine sites; and a flattened management structure. We have deepened our engagement with China, where the partnerships we have already forged will link us to that country’s growing economic and geopolitical stature and give us access to the many value-creating opportunities it is generating. We have also made significant advances on the technological front, and autonomous production systems and projects throughout Barrick will position us as a global leader in mining efficiency.

The most important milestone on this journey was Barrick’s merger with Randgold Resources, completed on January 1, 2019, which has taken us a long way towards our goal of combining the industry’s best assets with its best people. The numbers speak for themselves. The new Barrick owns five of the world’s Top 10 Tier One gold assets, with two more under development. At the time of announcement, our combined company had the lowest total cash costs and the highest adjusted EBITDA margin among its peers, as well as the largest gold reserves and extensive land positions in the world’s most prolific gold districts.

It also brought together two companies with a bedrock belief in the primacy of partnerships and a culture of forging mutually beneficial relationships with host governments, communities and suppliers, and a commitment to sharing the value they create equitably with all stakeholders. That commitment extends to treating the people they employ and the environments in which they operate with care and respect, as demonstrated by their exemplary health and safety records.

Mark Bristow, the Chief Executive of Randgold, was appointed to the new position of President and Chief Executive Officer of Barrick. Mark and his team have brought to Barrick the industry’s best record of value creation and a reputation for operational excellence and disciplined execution. Within his first month here he significantly advanced our decentralization program by establishing regional managements for North America, Latin America and Australia Pacific, and Africa and the Middle East. These are already making a tangible impact on the way we operate. At corporate office and throughout the group, the members of both companies have been completely integrated and aligned with the new Barrick’s aims and values.

These are to be results-driven, with agile decision-making and effective execution; to deliver fit-for-purpose solutions; to foster genuine partnerships and deliver on our promises to our partners; to communicate directly, honestly and transparently; to act as responsible and accountable owners; and to earn our social license by being a good neighbor to our communities, managing the impact of our operations, and building sustainable legacies for them.

We have also decided on our strategic filters for investment. Tier One assets have been defined as having a reserve potential greater than 5 million ounces of gold and at least a 15% IRR at the long-term gold price, while Tier Two assets need a reserve potential of more than 3 million ounces with a minimum 20% IRR. These assets should be in world-class geological districts, where we will have the right to mine and repatriate profits, and which fit our political risk, social license and environmental compliance criteria. We should have active management participation and it should enhance our strategic partnering network.

We are now one team, with one mission: to be the world’s most valued gold mining business by finding, developing and operating the best assets, with the best people, to deliver sustainable returns for our owners and partners. We are reinventing Barrick, and while we are not yet where we want to be, I believe the model of a modern mining company we are creating will lead the way for a reinvention of the industry.

Building on the clear success of our merger with Randgold, in March 2019 we announced an agreement with Newmont Mining Corporation to create a joint venture combining our respective mining operations, assets, reserves and talent in Nevada. It is also expected to deliver an estimated $500 million in average annual pre-tax synergies in the first five full years of the combination, representing a projected total of $4.7 billion in pre-tax net present value over a 20-year period.

Following the merger between Barrick and Randgold, Barrick’s Board was reconstituted and streamlined with nine directors, down from the previous 15, six of whom were appointed by Barrick and three by Randgold. The Barrick nominees were Maria Ignacia Benitez, Gustavo A. Cisneros, J. Michael Evans, Brian L. Greenspun, J. Brett Harvey (Lead Director) and me. The Randgold nominees were Mark Bristow, Christopher L. Coleman and Andrew J. Quinn. Very tragically, in late February Maria Ignacia Benitez passed away after a struggle with cancer. Maria joined Barrick’s Board of Directors in April 2018, and quickly became a trusted advisor and cherished friend to the company. We will all greatly miss her sage counsel, her leadership, and equally, her deep sense of kindness and decency.

I continue to serve as Executive Chairman, while Mark Bristow became President and Chief Executive Officer. Graham Shuttleworth was appointed as Senior Executive Vice-President and Chief Financial Officer, and Kevin Thompson continues as Senior Executive Vice-President, Strategic Matters.

Also following the merger, the Board was reorganized to operate with three standing committees. These are Audit & Risk, chaired by Brett Harvey, Compensation, chaired by Christopher Coleman, and Corporate Governance and Nominating, chaired by Gustavo Cisneros.

The new Board includes international business leaders and mining industry professionals, and brings together a wide range of skills, experience and perspectives. Its composition is in line with our strategy of regularly strengthening and refreshing the Board, ensuring that it is equipped to address effectively the changes, opportunities and risks in our business.

John L. Thornton
Executive Chairman

 
Next: Mark Bristow