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Week-long excursion underscores burgeoning partnership

 
August 3, 2018
 

At some point in the next 10 to 15 years, China will become the largest economy in the world. When it does, it will be the first time that a country other than the United States has held that position in nearly 150 years. It will also be the first time that a non-English-speaking nation has been at the center of the global economic order since the Industrial Revolution began in Great Britain.

This historic shift underscores the obvious—that any serious company in the 21st century must have a strong relationship with China. This insight is relevant for the gold industry even more than most given that China is both the largest producer and consumer of the metal. China also possesses distinctive advantages as a potential source of low-cost capital, technology, supplies and geopolitical leverage for any global mining firm. And the country’s own gold producers, ambitious and actively in search of opportunities around the world, offer the prospect of uniquely strategic and long-term partnerships.

Barrick’s focus on China is real and deliberate. In 2014, we created the position of President for Barrick China to manage our interests there. In 2015, we sold half of our ownership in the Porgera gold mine in Papua New Guinea and began joint operations with the buyer, Zijin, one of China’s big three gold miners. In 2017, we formed a 50-50 joint venture with Shandong Gold, another one of the big three, at the Veladero mine in Argentina. In addition, two of China’s largest banks—ICBC and China Construction Bank—have joined Barrick’s revolving credit facility, the first time either has forged such a relationship with a Western mining firm.

First stop, Shandong Province

It is against this backdrop that our Executive Chairman John Thornton led six members of Barrick’s Executive Committee on an intensive week of work and education in China, a country that is increasingly a part of Barrick’s present, and a central part of Barrick’s future. Thornton was among the first Western business leaders to recognize the significance of China’s rise, and has built close relationships with the country’s business and political leaders over more than three decades.

First stop was Jinan, the capital city of Shandong Province, where we met with Governor Gong Zheng and our partners at Shandong Gold. The Governor leads a province with a population of 100 million, and an economy of over $1 trillion—larger than Indonesia, and about the size of Mexico—that grew another 7.4 percent last year.

At a ceremony with Governor Gong present, Barrick and Shandong Gold signed an enhanced strategic cooperation agreement building on our partnership at Veladero. The agreement highlighted an independent study that Shandong Gold is conducting into development options for the Lama project in Argentina and potential synergies with nearby Veladero.

With Shandong Gold Chairman Chen Yumin as our host, we next flew to Yantai, the province’s second largest city, and traveled by road to the Jiaojia gold mine, where we toured the underground operations of China’s largest gold mine by production. We visited a reclaimed tailings facility adjacent to the ocean that was highly polluted during the 1970s and 80s before Shandong Gold turned it into a model for environmental reclamation. Today, the coastline attracts tens of thousands of beachgoers each summer, even while Shandong Gold operates an advanced underground mine almost one kilometer underneath the ocean nearby. Our final stops were the highly-automated Sanshandao processing facility, and the remote digital operations control center some five kilometers away.

On to Beijing

In Beijing, our next stop, the group heard about the powerful influence of Chinese history and 4,000 years of continuous civilization on the fast-paced trajectory the country is on today. That trajectory includes efforts to leapfrog the West in key technologies of the future, such as artificial intelligence and blockchain, and we discussed with experts how such technologies coming out of China could be commercialized to improve Barrick’s business, and ways to bridge the gap between operations and technology.

We heard a presentation by Ma Jun, the respected environmentalist and founder of the Institute for Public and Environmental Affairs, on the progress China has made in addressing its devastating pollution problem and the challenges that remain. Ma demonstrated the China Pollution Map Database, also called the Blue Map, developed by his institute, which reports in real-time through a smartphone app and website how cities and factories nationwide are performing in terms of air, water, and soil pollution. The database acts as a transparent informational platform. It identifies geographical locations of pollution sources, pollutant discharge levels compared to the national standard, openly calling out enterprise environmental violations and issuing risk alerts to violators for feedback and compliance. This presentation led into an internal discussion on how Barrick can meaningfully improve its existing environmental protection practices.

The Blue Map from the Institute for Public and Environmental Affairs displays real-time environmental data.

We had dinner with Madam Fu Ying, Chairperson of the Foreign Affairs Committee of the National People’s Congress. As a former Vice Minister of Foreign Affairs, Ambassador to both the United Kingdom and Australia, and a participant in the Six-Party Talks with North Korea, Madam Fu is one of China’s most experienced and accomplished diplomats. She gave us a tour d’horizon of Chinese foreign policy, and how the country’s leaders view the most pressing issues facing the nation, including North Korea and the relationship with the United States.

The next day, we heard about the state of the Chinese economy and capital markets in these turbulent times from Fang Xinghai, the Stanford-educated Vice Chairman of the China Securities Regulatory Commission, China’s equivalent of the U.S. Securities and Exchange Commission. Victor Yuan, Founder and Chairman of Dataway Horizon, an early mover in China’s public opinion polling industry, briefed our group about the issues of greatest concern to ordinary Chinese citizens, including corruption and environmental pollution.

Travelling, speedily, to Shanghai

In the afternoon, we rode the Fuxinghao, China’s newest, and the world’s fastest, bullet train, traveling at 350 kilometers (217 miles) an hour for the 4.5-hour trip from Beijing to Shanghai. That trip would have taken 15 hours just 10 years ago. Today, China has 25,000 kilometers of high-speed rail traversing a country about the size of the continental United States, making it the most extensive high-speed rail network in the world. Equally astounding is that the first high-speed line of just 120 kilometers between Beijing and Tianjin was opened in August 2008, a mere 10 years ago.

In Shanghai, we learned about the unique role that China’s most cosmopolitan city has played in the country’s turbulent modern history, especially as a venue for experimentation with reforms.

At the World Gold Council’s Shanghai office, we received a briefing on the Chinese market, regulatory framework, and innovative new products that domestic technology companies are developing to attract younger Chinese to become gold consumers and investors. We also visited the Guanfu Museum to view gold artifacts dating back as far as 1000 years to better understand the fascination with gold that has always been a facet of Chinese culture.