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Not all activist shareholder campaigns require a battering ram. At Barrick Mining, the $72bn Canadian gold producer that counts Elliott Management as a significant shareholder, the push to unlock value from a sprawling portfolio of assets looks more like a polite but pointed tap on the shoulder.
Barrick was already shaking itself up before Elliott’s stake became public in November. It replaced its chief executive in September and overhauled the team that runs its prized North American business. On Monday, the company said it has unanimously authorised management to explore an initial public offering of its North American gold assets.
The proposed offshoot would bundle Barrick’s interest in Nevada Gold Mines, the world’s largest gold-producing complex; its stake in the Pueblo Viejo mine in the Dominican Republic; and Fourmile, a wholly-owned Nevada deposit that Barrick hails as one of the most significant gold discoveries of this century. The company would float only a small minority stake, preserving a controlling majority.
The logic is compelling. The gold price has tripled since Barrick’s 2019 merger with Randgold, and the group’s shares have almost managed the same gain. But they have lagged behind rivals such as Agnico Eagle and Kinross. Barrick’s far-flung portfolio, stretching from Nevada to Mali to Pakistan, trades at a lower multiple of its net asset value than peers more squarely rooted in North America.
An IPO of its prized North American assets — which produces more than half of the company’s gold — offers a tidy workaround. The move would allow investors to bet on its top-tier, low-risk gold production without the headaches of its African and Asian ventures. Barrick keeps control and preserves any upside from the assets if new management succeeds in improving production and efficiency. A future sale would not be out of the question: rival Newmont is reportedly a potential suitor.
In any case, valuation maths support the case for a partial IPO. Analysts at TD Bank reckon carving out North America could lift the combined share price by roughly one-fifth. That rises to almost one-third if one were to apply to the North American business the same price-to-net-asset-value multiple as a high-quality gold miner such as Agnico Eagle.
Elliott hasn’t said publicly what it wants from Barrick. It could push for more dramatic moves. Still, Barrick has made it more likely the conversation starts on a friendly footing.