It is the world’s largest gold producer, but perhaps, didn’t wish to be misconstrued as a one-trick pony, a mindset that cost the CEO of Barrick Gold Corp. (TSX: ABX) his job this week. Officials at the corporation handed Aaron Regent the sack on Wednesday, after he’d led the company into diversifying into copper, which had bruised to Barrick’s share price.
Chief Financial Officer Jamie Sokalsky was named to succeed Regent, who’d been at the helm for three years. During that time, he ended Barrick’s multi-billion-dollar hedging program, spun off its African mines and, last year, bought Australia’s Equinox Minerals for $7.3 billion. According to a report in the Financial Post Wednesday, Barrick may fail to meet its five-year gold-production target while having to write down some of the $4.3 billion U.S. of copper-related goodwill on its balance sheet.
The Post piece then went on to quote one investment analyst as saying: "We thought you were doing gold, and now you’re doing copper — this is completely different from what we were thinking," referring to the July acquisition of Equinox.
"If you’re going to change the strategy, you’ve got to let us know."
The Equinox deal was aimed at giving Barrick control of the Lumwana mine in Zambia and Saudi Arabia’s biggest copper deposit, broadening its metal output as gold prices headed heavenward. For the money laid out on the purchase, it would be only the second-largest acquisition by Barrick, after its $10.2-billion purchase of Placer Dome Inc. in 2005.
Not that Sokalsky’s appointment has investors turning handsprings. Said the Globe and Mail this week, "some wonder if Mr. Sokalsky has the backbone to stand up to company founder Peter Munk, who remains as co-chairman and a driving force at Barrick." Others view Sokalsky as a competent, hard-working executive who rose up the ranks since joining Barrick as treasurer in 1993.
Even so, first-quarter earnings at the gold behemoth were better than their counterpart the year before, if only slightly so, gathering $1.03 billion ($1.03 per share), or 3% better than from $1.00 billion ($1.00 per share) in the first quarter of 2011. Numbers released early in May also pointed to a full year 2012 gold production guidance of 7.3-7.8 million ounces.
However, and Barrick’s share price remains far from where investors would like it to be. The price crested last September at $55.36 for the last 52 weeks, before plummeting to a low of $35.11 in mid-May. The Regent firing brought the price up past the $44 mark before it settled the latter part of the week, just barely above the $40 mark on June 8. Obviously, Messrs. Monk, Sokalsky and the rest of the executive board of this massive have some catching up to do, and plan to do it by sticking to gold production, what it appears they know best.
