Elliott Investment Management has reportedly taken a large stake in Barrick Mining (TSX:ABX,NYSE:B), the Financial Times reported on Tuesday (November 18), adding activist pressure to the gold producer, which is already dealing with escalating operational problems and a leadership shakeup.
The moves comes just weeks after the abrupt September exit of former CEO Mark Bristow, and as Barrick’s new chief executive, Mark Hill, begins overhauling the company’s regional structure.
In an internal memo seen by Bloomberg, Hill said Barrick will fold its Pueblo Viejo mine in the Dominican Republic into its North American division and merge its Latin America and Asia Pacific operations to improve performance.
Elliott’s investment also comes during a challenging phase for Barrick.
The company has been hit by rising costs at key North American assets and the loss of its most profitable operation, the Loulo-Gounkoto mine in Mali, after the military junta seized control earlier this year.
The dispute, which was tied to Mali’s new mining tax code, resulted in 3 metric tons of gold being taken by the state and the detention of four Barrick employees. The asset loss also triggered a roughly US$1 billion writeoff.
The setbacks have left Barrick trailing behind its peers despite a powerful gold price rally. Company shares are up 117 percent in the past year, compared with an average 130 percent gain among major rivals.
Barrick’s performance has company executives weighing their options.
As mentioned, a split into two companies is being considered. Four people told Reuters that this could involve one firm focused on North America and another holding assets in Africa and Asia. Another option would involve selling Barrick’s Africa portfolio outright, along with the Reko Diq project in Pakistan once financing is secured.
Barrick is also trying to resolve its dispute with Mali before pursuing a sale of that operation.
Investors have pushed similar ideas before, but were stifled due to the company’s North American footprint.
The company’s core US asset is Nevada Gold Mines, which it operates in partnership with Newmont (NYSE:NEM,ASX:NEM), and the sentiment has been that “there is not much of value” in Barrick’s remaining mines.
Bloomberg reported last month that Newmont was looking at whether a transaction could give it control of the Nevada operations it shares with Barrick, but discussions have not advanced since then.
Elliott, meanwhile, has a long record of targeting miners, including Anglo American (LSE:AAL,OTCQX:AAUKF) and Kinross Gold (TSX:K,NYSE:KGC), and often pushes for structural changes.
For Barrick, the challenge now is stabilizing its operations, while deciding how far to go with strategic restructuring in today’s historically high gold price environment.
Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.