Activist Investor Elliott Management Targets Barrick Gold
In a significant move shaking the Canadian mining sector, the activist hedge fund Elliott Management has built a substantial stake in Barrick Gold Corp., the world's second-largest gold producer. This development, confirmed by sources familiar with the matter, comes at a pivotal time for the Toronto-based miner, which has struggled to fully capitalize on the recent historic rally in gold prices despite the favourable market conditions.
A Push for Strategic Change and Potential Breakup
Elliott's investment, which places it among Barrick's top ten largest investors with a holding valued at a minimum of $1 billion, signals a push for strategic changes. The activist investor is reportedly encouraged by the idea that Barrick could split into two separate entities. This would involve separating its more stable and lucrative North American operations from its mines in potentially riskier jurisdictions across Africa and Asia.
The speculation around a corporate restructuring has intensified since the sudden departure of CEO Mark Bristow in September. Under Bristow's leadership, Barrick faced criticism for repeatedly missing production and cost targets. His tenure also saw the company lose control of a key mine in Mali, a significant setback. Furthermore, shareholders have expressed concerns about the massive $9 billion Reko Diq copper-gold project in Pakistan, located in Balochistan, a province known for a violent separatist movement.
Market Reaction and Future Implications
The news of Elliott's involvement had an immediate positive impact. Following the report, Barrick's New York-listed shares climbed almost three per cent in pre-market trading. This investor enthusiasm highlights the market's belief that Elliott, a firm renowned on Wall Street for its formidable activism with $76.1 billion in assets under management, can catalyze value creation.
Barrick's board, led by Chair John Thornton, has recently held discussions about a potential separation of the business, effectively unwinding the 2019 merger with Randgold that created the modern-day Barrick. While the exact size of Elliott's stake and its specific demands remain undisclosed, the fund's history of influencing major corporations like BP and Honeywell suggests a period of significant strategic evaluation lies ahead for the gold mining giant. Both Elliott and Barrick have declined to comment on the situation.
Despite Barrick's market value reaching $88 billion, its share price performance has lagged behind rivals. Over the past five years, Barrick's shares have gained less than 55%, compared to impressive gains of 232% for Kinross Gold and 144% for Agnico Eagle, underscoring the pressure on the company to improve returns for its shareholders.
