Barrick chairman aims to put shine back in gold miner

When John Thornton came to Barrick Gold, he found what he calls a "contaminated" culture that meant the world's biggest and most valuable gold miner had well and truly lost its shine.

For the former Goldman Sachs banker, the evidence was in deals such as Equinox, the copper miner that Barrick bought for C$7.3bn in 2011 and has now written most off.

It was also in projects such as Pascua-Lama, an Andean gold deposit whose estimated cost more than doubled before Barrick halted the development unfinished.

"Most outstanding companies, after some period of time, tend to drift off and lose their way," says Mr Thornton now. In almost a year since he took over as executive chairman from Peter Munk, Barrick's elderly founder, he has seen his job as reversing that drift.

Barrick's chief executive departed last year while new cohorts have been ushered into the executive suite and into the boardroom. Head office numbers in Toronto have almost halved and lines of command cut between Canada and Barrick's far-flung mines.

Barrick will be more rigorous about spending, Mr Thornton says, and executives will have to hold large amounts of stock until retirement to make sure they think like shareholders.

Speaking in London, in his first interview as executive chairman, Mr Thornton acknowledges that these are just assertions of improvement. Barrick, he says, is now "meaningfully different [but] we still have a long way to go".

Barrick's share price - it has lost its position as the most valuable gold miner by market capitalisation - suggests investors are biding their time.

The miner is lumbered with debt that is almost as large as its $13bn stock market value. The gold price is also volatile, having come down more than one-third since 2011.

The debt is a big concern amid such volatility, says Mr Thornton. "If I owned a gold company personally it would have no debt. The fact that we have a lot of debt . . . is not a good place to be."

Barrick has vowed to cut $3bn from more than $10bn of net debt this year. Mr Thornton says Barrick is confident about disposals and more clearly understands the value of its assets.

He cites a turnround at Acacia Mining, Barrick's UK-listed African subsidiary, which Barrick was keen to sell before a new chief executive triggered big improvements with an operating overhaul.

Mr Thornton's conclusion is: if Barrick misunderstood this asset, what else has it got wrong? "The deeper you look [at the assets] the better they look - there is value that was not being optimised previously," he now says.

Mr Thornton was anointed by Mr Munk as his successor, following a stellar career at Goldman, where he rose to become president, and then a role in Chinese academia that has made him an acknowledged expert on relations with Beijing. A long-term goal remains to develop a strategic relationship between Barrick and China.

Yet the American has been part of recent uncertainty and investor discontent at Barrick, brought in to the company at significant expense and blamed publicly by Newmont Mining, Barrick's US rival, for the failure of a potential merger deal last year.

In his limited public statements, Mr Thornton sent mixed messages on whether Barrick would diversify, initially suggesting that this was an aim, but then this year saying Barrick would remain focused on gold.

Mr Thornton says diversification remains possible - in the longer-term. "This is not carved in stone for all time," he says.

Jorge Beristain, an analyst at Deutsche Bank in the US, says senior executives' pay at Barrick remains a source of investor concern. Mr Thornton was paid $13m, mainly in stock, by Barrick for 2014.

"Shareholders want to feel that management shares their pain but instead they see that they are still being well rewarded, whether in stock or cash. There is a feeling that Thornton and the others are in an ivory tower and not yet rolling up their sleeves," Mr Beristain says.

Mr Thornton argues that Barrick's new pay structure, including shares that cannot be sold until their holder leaves the company, is "the most owner-centric system in the world".

But he admits there will be "counter-intuitive" years "where we are turning ourselves around but it hasn't shown up in the share price".

As for Newmont, the deal failed because of differences over how to spin off non-core assets, Mr Thornton says. "Sitting here today, Newmont is nowhere on our radar screen . . . we have plenty to focus on to get where we want to be." Newmont declined to comment.

Mr Thornton says his role is about setting the framework for Barrick to operate. "I am not, and nor do I want to be, involved in the day-to-day running of the business," he says. "Think of me as both architect and spiritual keeper of the flame, in the same way as Peter Munk was."

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