{"id":58,"date":"2015-11-25T22:52:39","date_gmt":"2015-11-26T03:52:39","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/barrick-gold-corporation\/"},"modified":"2015-12-04T19:36:54","modified_gmt":"2015-12-05T00:36:54","slug":"barrick-gold-corporation","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/barrick-gold-corporation\/","title":{"rendered":"Barrick Gold Corporation"},"content":{"rendered":"

Company Background<\/strong><\/p>\n

Barrick Gold Corporation, headquartered in Toronto, Canada, originated from Barrick Resources founded in 1980s. After suffering financial losses in oil and gas, the company decided to focus on gold. The company name was changed to Barrick Gold Corporation in 1995 (Reference 9). It is currently the largest gold producer in the world.<\/p>\n

Business Model<\/strong><\/p>\n

Barrick creates value by developing and operating high quality mines, and growing its reserve\/resource base through new mineral reserve discoveries and acquisitions.<\/p>\n

Operation Model<\/strong><\/p>\n

Today Barrick operates in Argentina, Australia, Canada, Chile, Dominican Republic, Papua New Guinea, Peru, Saudi Arabia, US, and Zambia (Reference 7). Its operation include two main processes.<\/p>\n

    \n
  1. Building mineral reserve\/resource through exploration and acquisition<\/em><\/li>\n<\/ol>\n

    For continual growth and maintain its position as a leading gold producer, Barrick needs to constantly maintain and increase its reserve\/resource to feed into future mine development.<\/p>\n

    One way of increasing resource is through exploration. Since 1990, Barrick has spent approximately $3.3 billion on exploration and discovered\u00a0approximately 131 million ounces of reserves (Reference 7). Its average finding cost of is $25 per ounce, about half the industry average (Reference 7). Barrick\u2019s recent discovery includes Goldrush discovery, one of the largest gold discoveries in the last decade (Reference 8). Additionally, Barrick holds\u00a0claims\u00a0on many of the world\u2019s most prospective land\u00a0on which the likelihood of discovery is relatively higher.<\/p>\n

    Barrick\u2019s also has made a series of aggressive acquisitions to increase its resource\/reserve. In 2001, the $2.3 billion acquisition of Homestake Mining made Barrick the world’s second largest gold producer (behind South Africa’s AngloGold, Reference 5). In 2005, Barrick paid $12 billion to acquire its rival Placer Dome (Reference 6), the largest acquisition in the history of gold mining.<\/p>\n

    Barrick is currently the largest holder of gold reserves in the world. Please see the graph below.<\/p>\n

    \"Figure<\/a><\/p>\n

    Source: http:\/\/marketrealist.com\/2015\/09\/comp-gold-miners-expect-production-growth-going-forward\/<\/p>\n

      \n
    1. Mineral Extraction<\/em><\/li>\n<\/ol>\n

      Mineral extraction generates revenue which creates value for shareholders and job opportunities for workforce.<\/p>\n

      Among major gold producers, Barrick has one of the lowest cash costs per ounce as shown below.<\/p>\n

      \"Figure<\/a><\/p>\n

      Source: http:\/\/seekingalpha.com\/article\/3115306barrickgoldacontrarianpointofview?page=2<\/p>\n

      Barrick\u2019s five core mines include Cortez in Nevada, Goldstrike in Argentina, Pueblo Viejo, Lagunas Norte in Peru, and Veladero. These operations made up 60% of Barrick\u2019s 2014 production at $716 per ounce cost (Reference 7).<\/p>\n

      Barrack has been trying to reduce costs and increase mine life to maximize value extraction from these mines. For example, in Goldstrike, Barrick used thiosulfate circuit, an innovative technology, to unlock full value of the mine (Reference 7). At Lagunas Norte, Barrick was evaluating a plan to mine refractory ore below the current oxide ore body in order to extend the mine\u2019s life (Reference 7). Barrick also completed a feasibility study on installing an additional shaft at\u00a0Turquoise Ridge to\u00a0potentially double total output (Reference 7).<\/p>\n

      Barrick also has a few other mines in operation generating cash flow at current gold prices. Overall costs of these mines are higher on average.<\/p>\n

      By extending mine life, increasing mineable reserve using new technology, or reducing cost, Barrick is creating value to shareholders, employees and local government.<\/p>\n

      Recent Debt Crisis<\/strong><\/p>\n

      While acquisition is a good strategy for establishing its leader position in resources\/reserve base, Barrick ran into debt issue due to past blundered acquisitions and capex overruns (Reference 1). It has the highest Debt\/Equity ratio among the major gold miners as shown below.<\/p>\n

      \"Figure<\/a><\/p>\n

      Source: http:\/\/marketrealist.com\/2014\/10\/barrick-financially\/<\/p>\n

      In reaction to shareholders starting to lose confidence, Barrick has been optimizing its portfolio by divesting some non-core assets to repay debt. For example, the company sold half of its Child mine to Antofagasta Plc for $1 billion in July 2015 (Reference 3) and sold half of its stake in the Porgera mine in Papua New Guinea to Zijin Mining for $298 million (Reference 4). The company plans to reduce debt by $3 billion by 2015 (Reference 2).<\/p>\n

      The company also tried to reduce cost by making its management structure leaner (Reference 2).<\/p>\n

      Conclusion<\/strong><\/p>\n

      Despite that the gold price slump made many previously attractive assets less appealing nowadays, forcing Barrick to sell its assets to optimize its balance sheet, overall, Barrick grew from a startup to the world\u2019s largest gold miner in under three decades. In my opinion, Barrick\u2019s operation is in line with its business strategy of creating value by developing and operating high quality mines and growing its reserve\/resource base. I conclude that Barrick\u2019s operation is effective.<\/p>\n

      References<\/p>\n

      Reference 1: Koven P, 2013. Barrick rebellion: With gold miner\u2019s stock in the dumps, investors push back. Available at http:\/\/business.financialpost.com\/investing\/barrick-gold-agm-wednesday<\/p>\n

      Reference 2: Koven P, 2015. Barrick Gold Corp chairman John Thornton lays out strategy to focus on gold and improve returns. Available at http:\/\/business.financialpost.com\/news\/mining\/barrick-gold-corp-chairman-john-thornton-lays-out-strategy-to-focus-on-gold-and-improve-returns<\/p>\n

      Reference 3: Koven P, 2015. Barrick Gold Corp to sell half of Chile mine to Antofagasta Plc for US$1 billion. Available at http:\/\/business.financialpost.com\/news\/mining\/barrick-gold-corp-to-sell-half-of-chile-mine-to-antofagasta-plc-for-us1-01-billion<\/p>\n

      Reference 4: Koven P, 2015. Barrick Gold Corp, Ivanhoe Mines Ltd sell stakes to China\u2019s Zijin in Papua New Guinea, Congo mines. Available at http:\/\/business.financialpost.com\/news\/mining\/barrick-gold-corp-sells-50-stake-in-papua-new-guinea-mine-to-china-in-bid-to-forge-closer-ties<\/p>\n

      Reference 5: Unknown, 2001. Barrick buying Homestake. Available at http:\/\/edition.cnn.com\/2001\/BUSINESS\/06\/25\/barrick.homestake\/<\/p>\n

      Reference 6: Unknown, 2006. Barrick completes takeover of Placer Dome. Available at http:\/\/www.globeinvestor.com\/servlet\/ArticleNews\/story\/GAM\/20060316\/RTICKER16-3<\/p>\n

      Reference 7: Unknown, 2014. Barrick Gold Corporation Annual Report 2014. Available at www.barrick.com<\/p>\n

      Reference 8: Unknown, 2015. Barrick Gold Corporate website www.barrick.com<\/p>\n

      Reference 9: Unknown, 2015. Barrick Gold Corporation History. Available at http:\/\/www.fundinguniverse.com\/company-histories\/barrick-gold-corporation-history\/<\/p>\n

       <\/p>\n","protected":false},"excerpt":{"rendered":"

      Barrick Gold Corporation is the largest gold producer in the world. Its stock price has suffered from gold price slump and high debt on its balance sheet. Is it an effective company or not? <\/p>\n","protected":false},"author":485,"featured_media":0,"comment_status":"open","ping_status":"closed","template":"","categories":[7],"class_list":["post-58","hck-submission","type-hck-submission","status-publish","hentry","category-winner"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/the-tom-challenge-tom-winners-and-losers-assignment\/","yoast_head":"\nBarrick Gold Corporation - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/barrick-gold-corporation\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Barrick Gold Corporation - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"Barrick Gold Corporation is the largest gold producer in the world. Its stock price has suffered from gold price slump and high debt on its balance sheet. Is it an effective company or not?\" \/>\n<meta property=\"og:url\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/barrick-gold-corporation\/\" \/>\n<meta property=\"og:site_name\" content=\"Technology and Operations Management\" \/>\n<meta property=\"article:modified_time\" content=\"2015-12-05T00:36:54+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/11\/Figure-1-300x217.png\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/barrick-gold-corporation\\\/\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/barrick-gold-corporation\\\/\",\"name\":\"Barrick Gold Corporation - Technology and Operations Management\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/barrick-gold-corporation\\\/#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/barrick-gold-corporation\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2015\\\/11\\\/Figure-1-300x217.png\",\"datePublished\":\"2015-11-26T03:52:39+00:00\",\"dateModified\":\"2015-12-05T00:36:54+00:00\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/barrick-gold-corporation\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/barrick-gold-corporation\\\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/barrick-gold-corporation\\\/#primaryimage\",\"url\":\"https:\\\/\\\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2015\\\/11\\\/Figure-1-300x217.png\",\"contentUrl\":\"https:\\\/\\\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2015\\\/11\\\/Figure-1-300x217.png\"},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/barrick-gold-corporation\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Submissions\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"Barrick Gold Corporation\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\",\"name\":\"Technology and Operations Management\",\"description\":\"MBA Student Perspectives\",\"potentialAction\":[{\"@type\":\"性视界Action\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Barrick Gold Corporation - Technology and Operations Management","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/barrick-gold-corporation\/","og_locale":"en_US","og_type":"article","og_title":"Barrick Gold Corporation - Technology and Operations Management","og_description":"Barrick Gold Corporation is the largest gold producer in the world. Its stock price has suffered from gold price slump and high debt on its balance sheet. Is it an effective company or not?","og_url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/barrick-gold-corporation\/","og_site_name":"Technology and Operations Management","article_modified_time":"2015-12-05T00:36:54+00:00","og_image":[{"url":"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/11\/Figure-1-300x217.png","type":"","width":"","height":""}],"twitter_card":"summary_large_image","twitter_misc":{"Est. reading time":"5 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/barrick-gold-corporation\/","url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/barrick-gold-corporation\/","name":"Barrick Gold Corporation - Technology and Operations Management","isPartOf":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website"},"primaryImageOfPage":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/barrick-gold-corporation\/#primaryimage"},"image":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/barrick-gold-corporation\/#primaryimage"},"thumbnailUrl":"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/11\/Figure-1-300x217.png","datePublished":"2015-11-26T03:52:39+00:00","dateModified":"2015-12-05T00:36:54+00:00","breadcrumb":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/barrick-gold-corporation\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/d3.harvard.edu\/platform-rctom\/submission\/barrick-gold-corporation\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/barrick-gold-corporation\/#primaryimage","url":"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/11\/Figure-1-300x217.png","contentUrl":"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/11\/Figure-1-300x217.png"},{"@type":"BreadcrumbList","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/barrick-gold-corporation\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/d3.harvard.edu\/platform-rctom\/"},{"@type":"ListItem","position":2,"name":"Submissions","item":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/"},{"@type":"ListItem","position":3,"name":"Barrick Gold Corporation"}]},{"@type":"WebSite","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website","url":"https:\/\/d3.harvard.edu\/platform-rctom\/","name":"Technology and Operations Management","description":"MBA Student Perspectives","potentialAction":[{"@type":"性视界Action","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/d3.harvard.edu\/platform-rctom\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"}]}},"_links":{"self":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/58","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission"}],"about":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/types\/hck-submission"}],"author":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/users\/485"}],"replies":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/comments?post=58"}],"version-history":[{"count":0,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/58\/revisions"}],"wp:attachment":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/media?parent=58"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/categories?post=58"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}