Barrick Gold Turns to New Finance Chief
April 24 2016 - 2:28PM
Dow Jones News
By Tatyana Shumsky
Investors will get their first chance to size up a new finance
chief at the world's largest gold producer this week, when Barrick
Gold Corp. reports first-quarter earnings.
The Canadian miner is betting that Catherine Raw, who previously
co-managed funds focused on the industry for BlackRock Inc., can
streamline the company and place more emphasis on shareholder
returns. She starts her new job following Tuesday's results and
conference call.
Barrick Gold -- and the broader gold mining industry -- has
lacked such a strategy, according to analysts and investors. The
company and its peers have historically prized output over
profitability, which contributed to ballooning costs, excessive
gold production and disappointing returns.
"They spent too much on acquisitions. They spent too much to
build huge projects that didn't generate enough returns or failed.
The management have a legacy of doing a poor job guiding their
companies," said Joe Foster, a fund manager at Van Eck Associates
Corp. "Part of the reason that Catherine has the job that she does
is that there's been a change in thinking at these companies," he
said.
Ms. Raw, 34 years old, will be the company's fourth CFO in five
years. She joined Barrick Gold a year ago to lead business
performance. She played a key role in developing and executing the
company's strategy, the company said.
Her ascent comes at a precarious moment for the company and the
precious-metals industry at large.
Barrick Gold shares are down 78% since 2011 after several
write-downs totaling $27 billion. That compares to $61 billion for
the gold-mining industry as a whole over the same period, roughly
58% of its book value, according to Deutsche Bank.
"Having somebody in the company who has lived that from a
professional standpoint can't be a bad thing from my point of
view," said Joe Wickwire, who manages Fidelity's Gold Select fund,
which owns Barrick Gold shares.
There are signs of a turnaround. Cost-cutting drove Barrick
Gold's 2015 production costs to $831 an ounce, well below current
gold prices of $1,230 an ounce.
Shares are up 119% this year, as of Friday's close, far
outpacing the 16% rally in gold prices. The company slashed its
debt by $3.1 billion in 2015 and plans to pay back another $2
billion in 2016.
Yet some are skeptical that Ms. Raw, is the right person for the
job.
"We kind of find it puzzling that you would have somebody who
has no prior CFO experience," said Dan Denbow, who manages $1.6
billion as a senior portfolio manager at USAA Investments. Finance
chiefs have several areas of responsibility, such as managing bond
financing, treasury planning and credit ratings, he said, not only
a company's relationship with Wall Street analysts and
investors.
A spokesman for Barrick Gold said Ms. Raw will be supported by
the company's treasurer, vice president of finance and tax and
controller, each of whom have spent a decade or more with the
company in financial roles.
Barrick Gold's leadership team is primarily focused on
allocating capital and managing talent, and Ms. Raw's past
experience as a fund manager "makes her the ideal choice for CFO of
Barrick," he said.
Analysts expect Barrick Gold to become profitable again this
year, with net income forecast at $574 million, according to
FactSet.
For the first quarter, earnings are expected at 13 cents per
share, up from 8 cents a share in the same period of 2015.
But longer term, the test for Ms. Raw and Barrick Gold is
whether the company delivers on its plan of becoming a smaller but
more profitable company.
"If there's a choice between volume growth and profitability,
heck yeah, you always take profitability," said Rick de los Reyes,
a fund manager at T. Rowe Price, which holds Barrick shares.
While Ms. Raw was an unusual choice for CFO, "she was an
investor, she knows what people care about and what they want to
hear," he said.
Write to Tatyana Shumsky at tatyana.shumsky@wsj.com
(END) Dow Jones Newswires
April 24, 2016 14:13 ET (18:13 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
BlackRock (NYSE:BLK)
Historical Stock Chart
From Aug 2024 to Sep 2024
BlackRock (NYSE:BLK)
Historical Stock Chart
From Sep 2023 to Sep 2024