New CEO Not Looking To Transform Barrick

Despite his relative youth, Barrick Gold’s (ABX-T, ABX-N)new president and CEO, Aaron Regent, has taken some of Canada’s largest companies through difficult times.

The 43-year-old chartered accountant was at the helm of Noranda and Falconbridge — as vice-president and chief financial officer, and president and CEO, respectively — at a time of low commodity prices and rising costs. And that’s part of what made Regent stand out as a candidate for the top post at Barrick, says the gold giant’s founder, Peter Munk.

“What separates the boys from the men are the tough times,” Munk said during a conference call to introduce Regent. “In that difficult environment (of low prices and rising costs), Aaron moved smoothly from the chief financial officer role to the operational areas, and that gave him a real foundation in every aspect,” Munk said.

Munk, who stepped in temporarily to fill in as president and CEO in March when the company’s previous leader, Greg Wilkins, took ill, says the board went through an exhaustive process to find a new leader when it became clear Wilkins would not be returning.

“We had an unprecedented number of top people applying for this job,” Munk said. “We could have found a dozen miners, (but) we were looking for somebody who would take this company forward not just as a miner, but as a businessman.”

Regent took over the reins of the company on Jan. 16; Munk will stay on as chairman.

What impressed Barrick’s board the most about Regent was the way he handled the $26-billion sale of Falconbridge to Xstrata (XSRAF-O, XTA-L) in 2006, negotiating the best deal possible for Falconbridge shareholders.

“There was nobody in the mining industry who would not have had the greatest admiration for the behaviour and for the strategic evaluation of every global option,” Munk said. “And that is how the Falconbridge saga came to a very happy end for the owners.”

In addition to his financial expertise and his experience in, and passion for, mining, Regent also acquired valuable experience at Brascan and Brookfield Asset Management (BAM. A-T, BAM-N).

Regent, who said that he was thrilled and honoured to be at Barrick, said he would be travelling to the company’s far-flung operations around the globe to gain an in-depth understanding of the company. On the operational side, his attention is focused on the three major projects under way, which he wants to ensure are “on track, on time and on budget.”

Although Regent did not mention the projects by name, the three are Buzwagi, Pueblo Viejo and Cortez Hills. Buzwagi, in Tanzania, is budgeted at US$400 million, and holds reserves of 3.6 million oz. gold. The Cortez Hills project, in Nevada, has a US$500-million budget and contains 11.5 million oz. gold in reserves. Finally, Pueblo Viejo, in the Dominican Republic, has a US$2.7-billion budget and hosts 20.4 million oz. of gold reserves. Pueblo Viejo is 60%-owned by Barrick and 40% by Goldcorp (G-T, GG-N).

Regent did mention the Pascua Lama project, which straddles the border of Chile and Argentina, and where construction has not yet started. The project has a US$2.7- billion budget and hosts reserves of 18 million oz. gold.

Regent says that Barrick is in great shape, with a strong team and a strong balance sheet, mak- ing him optimistic about the company’s ability to continue delivering value for shareholders.

People should not expect a major change in Barrick under his leadership, Regent said. While there is always room for improvement, he does not foresee a significant shift in strategy. “If it isn’t broke, why fix it?” he said. However, he acknowledged that a company has to adapt to changing circumstances.

Barrick’s three most important priorities will continue to be exploration, project development and acquisitions.

Regent did not show much enthusiasm for an idea, raised by an analyst, that Barrick could diversify and recast itself as another mega-miner in the mold of BHP Billiton (BHP-N, BLT-L) or Rio Tinto (RTP-N, RIO-L).

Although Barrick, which positions itself to investors as a gold play, is not too diversified by commodity, Regent says it is well diversified geographically. “Our focus will continue to be on gold,” he says.

Regent identified as his biggest challenge “ensuring we deliver on our production numbers and cost numbers.” People also underestimate the challenge of ensuring projects are on track, he said.

Although Barrick is in an excellent shape with its reserve base, and has an attractive project pipeline, he says that there is “the potential to take advantage of new opportunities.”

Regent identified capital allocation as both a challenge and an opportunity. “We must invest in a way that creates the most value,” he said.

Asked whether he would like to delay or hold back any activity on the merger-and-acquisition front, Regent’s reply was instructive.

“I would shudder to think that I will be a cause for a delay for anything that makes sense for the company,” he said. He did not name any imminent deals.

To Regent, the most important corporate value is to think and act as an entrepreneur and get things done, while maintaining a balance between expediency and prudence.

Responding to an analyst’s question regarding gold hedging, Regent said that 8% of Barrick’s reserves are hedged. He plans to continue with the existing policy to not enter into any new hedging.

Regent and Jamie Sokalsky, Barrick’s executive vice-president and chief financial officer, identified a number of bullish factors for gold on the conference call, in particular, the huge spending commitments of the new U. S. administration. They believe that the U. S. government will embark on a policy of reflation, weakening the greenback. Furthermore, over the next three to five years, mine production and the gold mining industry’s ability to grow supply will be a challenge.

Sokalsky quoted gold consultant GFMS as saying that the breakeven price of gold is in the US$600-to US$700-per-oz. range.

Sokalsky sees a strong base of support for gold, particularly in view of the proliferation of new investment products for gold, such as exchange-traded funds and gold’s safe-haven status.

“We are in the middle innings of the gold cycle,” Sokalsky said, adding that there are many more positive than negative factors for gold.

Regent ended with his vision for the company. “I want Barrick to be the highest-quality gold company: in performance, in returns, and in quality of asset base.”