JOHANNESBURG (miningweekly.com) – Having gold in your portfolio is a very solid insurance right now, as it always has been during global crises.

That is the view of Barrick Gold president and CE Dr Mark Bristow, whose company on Thursday reported 91% higher fourth-quarter operating cash flow to $5.4-billion and annual free cash flow to a new record high of $3.4-billion.

Net earnings per share were $1.31 for 2020 and adjusted net earnings per share of $1.15 was up 125% on the previous year.

In an interview with Mining Weekly, Bristow recalled the seven-year spread of the Great Financial Crisis of 2008 and expressed concern than the current crisis, as a consequence of the Covid-19 pandemic, might have an even longer spread, owing to more money being printed in months this time around, than was printed in years during the 2008 crisis.

Following that crisis, it was Bristow who took Randgold Resources, now merged into Barrick, to a new level, by remaining doggedly disciplined and paying down all debt.

During that crisis, paper money was also printed in large volumes, but at that stage it was aimed largely at making banks significantly safer.

This time around, a large portion of the printed money has gone to the general public, and there is also extra cash in the hands of many who are unable to spend as they were able to pre-Covid, on, for example, things like travel. At the same time, interest rates are low, which puts a bright spotlight on gold and gold equities investment opportunities.

Barrick is one of the gold companies that is riding high. It has trebled its dividend since the Randgold deal and has realised $1.5-billion from the sale of noncore assets.

“We have no net debt and we’ve got huge liquidity to be able to take on any opportunities. It’s a prudent conservative way of managing a balance sheet. But that’s what you have to do if you’re near the top of a cyclical investment, particularly on the revenue side, because that’s what the gold mining industry miscued on last time, when it went and blew all the money it was making and then the gold price went down. This time they’re giving it all to the shareholders without any consideration of using the opportunity,” said Bristow.

In 2009, just after the last crisis, Randgold bought Moto Gold, and ran up big capital and debt with the Tongon and Kibali gold mines, but then used the spike in the higher gold price to pay it all off. Now a similar wise approach is being adopted at Barrick.

“Our total resources grew net of depletion. We’ve had a record free cash flow year. We’ve got some very big projects on the Pueblo Viejo, in the Dominican Republic. We’ve got the development of the underground mine at Gounkoto, in Mali. We’ve got the shaft going down at Turguoise Ridge, in Nevada; we're developing the Goldrush underground project, in the Cortez Complex; we’re effectively restarting Veladero, with a new leach pad complex. That’s really impacted on our Latam production profile and then, of course, we’ve got the challenge in Papua New Guinea, which we’re taking out of our guidance for the time being.

“But notwithstanding all that, it's a solid outlook. Give me a gold price of between $1 700/oz and $1 800/oz any time of the day; $1 900/oz is utopia and $1 700/oz is good. I think having gold in your portfolio is a very solid insurance at this time, as it has always been during global crises,” said Bristow.

PRODUCTION TARGETS MET

Barrick has met its production targets for 2020 owing to consistent operating performance across the group, Covid notwithstanding.

Higher gold and copper prices drove annual operating cash flow up 91% to $5.4-billion and annual free cash flow to a new record high of $3.4-billion. Net earnings a share were $1.31 for 2020 and adjusted net earnings a share of $1.15 was up 125% on the previous year.

An unchanged quarterly dividend of 9c a share was declared and it was announced that it would propose a return of capital distribution of 42c a share based on the issued and outstanding shares as of December 31.

The total distribution of $750-million is derived from the $1.5-billion in proceeds from the company’s sale of noncore assets since 2019, and will be effected in three equal tranches to shareholders of record on dates to be determined in May, August and November this year. Senior executive VP and CFO Graham Shuttleworth said this return of capital, which would provide shareholders with a significantly enhanced return in 2021, was in line with Barrick’s strategy of returning surplus funds to shareholders.

Despite 2020’s unprecedented difficult operating conditions – which in addition to the pandemic had included a coup in Mali, the financial meltdown in Argentina and the Papua New Guinea government’s flirtation with resource nationalism – the company made further progress towards delivering on its environmental, social and governance (ESG) commitments, and expected to improve on its rating in last year’s industry-first scorecard, published in its sustainability report.

It has a detailed road map towards clearly defined emission reduction targets, based on climate science and operational realities, the company stated in a release to Mining Weekly.

“Unlike others, our plan does not rely on mine closures and production cutbacks. Our ultimate aim is net zero emissions with landmarked targets towards this goal, which are constantly reviewed and updated as new emissions-reduction opportunities are identified and realized. In addition, each operation has an effective plan for the continued transition to cleaner, more efficient energy sources, and our water usage performance continues to improve,” said Bristow.

“Our long-established partnership philosophy is the beating heart of our ESG strategy. It was invaluable in our management of the impact of the coronavirus on our business and our people and it also enabled us to provide much-needed support to our host communities and governments. On an everyday level, every operational site now has a fully functional community development committee to deal with local issues,” he said.

The group’s total attributable gold resources grew in 2020, net of depletion and excluding the impact of the disposition of Massawa, as a result of the focus on high-confidence geology models following the merger with Randgold.

Attributable gold reserves achieved a 76% replacement of depleted ounces, excluding Massawa, with the Africa and Middle East region once again more than replenishing their reserves.