Peter Munk, the flamboyant chairman of Toronto-based gold miner American Barrick Resources (TSE), is set to earn a pretax profit of $36.6 million by exercising options on two million shares.
Munk acquired the shares in January for $7 each under 4-year options granted to him in February, 1987, when they were trading at around $23. But mindful of the consequences of selling such a large block of shares on the open market, Munk has hired public relations firm Hill and Knowlton to handle the announcement on his behalf.
In a press statement, Munk said his decision to sell the shares is a result of having to satisfy obligations that arise under tax laws in Canada where a taxable benefit is derived from the exercise of options regardless of whether the underlying shares are actually sold.
In addition to financing the cost of the shares, Munk is, under the law, obliged to pay Canadian tax on the capital gain. As a result, he will net roughly $18 million if he elects to sell the shares all at once. On Aug. 29, the date of the announcement, Barrick shares fell by 87 cents to $25.12 after 232,000 changed hands. But a US$2-per-oz. drop in the gold price, which occurred on the same day, undoubtedly had a hand in Barrick’s market performance.
Despite the soft gold price, Barrick is regarded by institutions as a core holding because of its success in developing the Goldstrike mine in Nevada which should boost the company’s production to 1.1 million oz. next year from 596,220 oz. in 1990.
Munk says he will retain control of Barrick through Toronto-based Horsham (TSE) which owns 28.7 million Barrick shares or 21%.
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