The world’s second largest gold miner is trying to get bigger in copper

(Bloomberg) – For a company with “gold” in its name, Barrick Gold Corp. noticeably fixed on copper.

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As Bloomberg reported last week, the world's second-largest bullion producer recently approached First Quantum Minerals Ltd. to discuss a potential takeover. And though the move was unsuccessful — Barrick's informal overtures were rebuffed — his interest in buying a $17 billion copper mining company is the clearest evidence yet of the shifting focus of the company, whose origins lie in Nevada's gold veins.

Mark Bristow, Barrick's daring CEO, has talked about his desire to grow in copper for years. Now, the focus may shift to greater urgency: Barrick's gold production has fallen to its lowest level in several decades, while longtime industry competitor Newmont Corp. recently announced a major acquisition that will propel the company well out of Barrick's gold league.

While gold companies have historically prided themselves on being “pure companies” for investors looking to gain exposure to gold prices, Barrick sees copper as a strategic commodity, bolstered by demand for electrification. It is commonly found in ore bodies along with gold and can be processed using similar methods.

Copper is critical “if you want to be relevant in mining,” Bristow said on the company's recent conference call. “As a gold miner, you need to grow and add copper to your portfolio.”

The Canadian miner's biggest investment project is already a $7 billion copper-gold project in Pakistan, which Barrick plans to commission in 2028 and could operate for at least four decades. In addition, the Company is evaluating an expansion of its copper mine in Zambia while also exploring new deposits in the Middle East, Asia and Africa.

Bristow is not alone in his hunt for copper. Mining executives and analysts have been sounding the alarm about increasing scarcity since the mid-2020s as demand for copper in electric vehicles, wind and solar farms, and high-voltage cables increases. The world's largest miners are all looking to grow in copper to take advantage of future price increases, at a time when few new projects are planned.

However, Barrick may have an advantage over its competitors: Bristow has shown it's willing to venture into riskier regions where many Western miners are cautious about investing. A geologist by training, the South African manager at Randgold Resources Ltd., the company he founded, gained a reputation for building gold mines in the Democratic Republic of the Congo, Ivory Coast and Mali.

He brought the same approach to Barrick when the company bought Randgold at no premium in 2019. The company has revived the Reko-Diq project in Pakistan after settling a year-long dispute with the government over a 2011 decision to refuse a license to the mine.

Bristow has also been open about copper exploration in Zambia and Congo. According to people familiar with the matter, the Company is currently in talks with the Congolese government regarding potential exploration projects.

Bristow hasn't made any major acquisitions since joining Barrick, although he's certainly tried. The company attempted a hostile no-premium takeover bid for Newmont in 2019, which ultimately failed. He publicly toyed with the idea of ​​buying Freeport-McMoRan Inc. to increase Barrick's copper exposure again. At the same time, he's been a vocal critic of the idea of ​​getting bigger for the sake of it, claiming that organic growth — and not “stupid mergers and acquisitions” — is the best route, in an industry teeming with ill-timed deals to stay competitive.

Responding to news of Barrick's approach to First Quantum, analysts pointed to the difficulty of balancing Bristow's M&A discipline with the likelihood that any deal would require a hefty premium given the industry-wide struggle for copper assets. (By comparison, BHP Group Ltd. offered a 49% premium to OZ Minerals Ltd.'s unchanged share price to complete a A$9.6 billion ($6.6 billion) deal for Australia's copper mining industry.) )

Bristow has emphasized that at its core, Barrick is still a gold company. But the company's gold production has fallen to its lowest level since 2000, and its shares are down 5% this year. The acquisition of Newcrest Mining Ltd. by Newmont would cement its position as the world's leading gold mining company. The only metal production that has increased at Barrick since the Randgold merger is copper.

“It's as strategic as gold is valuable,” Bristow said recently.

– With support from Michael J. Kavanagh, Thomas Biesheuvel, Dinesh Nair and Jack Farchy.

(Adds a stock movement in the penultimate paragraph. In a previous version, the timing of the approach was corrected in the second paragraph.)

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