The global gold mining industry is generally caught between a rock and a hard place when it comes to the disconnect between fund managers and the business of producing sustainable metal and delivering margins. It leaves much value unrealized for owners, Barrick Gold (TSX: ABX; NYSE: GOLD) said during The Northern Miner’s recent Q4 Global Mining Symposium.
Speaking to Anthony Vaccaro, president of The Northern Miner Group during a keynote session, Bristow said fund managers’ ambition to gain more relevance often meant shareholders didn’t get the best value from the opportunities at hand.
“My critique is that actually through the behaviour of many fund managers, we keep forcing the gold industry into a trading platform and not developing long-term value,” said Bristow.
Since the merger of Randgold Resources and Barrick took place early in 2019, it sparked off a wave of consolidation at the top. In coming out of 2018 and his engagement with Barrick, the deal was followed by the joint venture in Nevada with Newmont (TSX: NGT; NYSE: NEM), Newmont’s acquisition of Goldcorp, and again, Barrick’s acquisition of Acacia Mining. This was followed by the Endeavour Mining (TSX: EDV; LSE: EDV) consolidation in West Africa, and subsequently the Kirkland Lake Gold (TSX: KL; NYSE: KL; ASX: KLA) acquisition of Detour Gold. “Those were all great deals. And they were at the right time of the market, and they delivered value,” said Bristow.
However, according to him, many deals were left on the table despite significant interest to consolidate the industry, and it was a good time to do it. The timing was near the bottom of the market.
“The single-asset companies should be wrapped up because then you can invest on the back of that investment. And fixing broken assets in an industry where the average life of mine is ten to 15 years — right now it’s under ten — makes it more difficult, and it makes it more difficult to consolidate the industry. And so then the fund managers want to have that control,” said Bristow.