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Barrick Gold Corp. (ABX) founder and Chairman Peter Munk said Chief Executive Officer Aaron Regent will step down after the world’s biggest producer of the metal was “disappointed” by its share performance.
Chief Financial Officer Jamie Sokalsky, 55, will take over immediately, Toronto-based Barrick said today in a statement. Sokalsky will also replace Regent on the board, while John Thornton, a former Goldman Sachs Group Inc. co-president and currently a Barrick director, will serve as co-chairman.
“We are fully committed to maximizing shareholder value, but have been disappointed with our share price performance,” Munk, 84, said in the statement.
Gold producers have lagged behind the price of the precious metal in the past five years as investors increased purchases of physical gold and exchange-trade funds backed by the commodity. Regent’s ouster also comes 11 months after he completed the acquisition of Equinox Minerals Ltd. for about C$7.3 billion ($7.1 billion) to add copper production in Africa. Barrick overpaid for Equinox by 50 percent, said George Topping, an analyst at Stifel Nicolaus & Co.
“This action may be more related to finding a ‘fall guy’ for the disastrous” Equinox deal, Topping, who is based in Toronto and recommends buying the stock, said in a note.
Barrick dropped 3.8 percent to $40.45 at the close in New York.
The price of gold for immediate delivery in London soared 92 percent from Jan. 16, 2009, when Regent became CEO, through yesterday. Barrick’s shares rose 23 percent in the period, while the NYSE Arca Gold BUGS Index of 16 gold companies climbed 65 percent.
Holdings of gold through ETFs have more than tripled in the last five years and reached a record 2,410.2 metric tons on March 13, valued at about $127 billion, according to data compiled by Bloomberg.
“Gold equities have lagged and Barrick has been the poster boy of disappointing performance,” John Stephenson, a Toronto- based fund manager at First Asset Investment Management Inc. who owns Barrick shares, said in a telephone interview. “The Street is asking, ‘When do we see results?’”
Sokalsky joined Barrick as treasurer in 1993 and became CFO in 1999. Before starting with the company, he spent a decade as an executive at Canadian food processor and distributor George Weston Ltd. He has a bachelor’s degree in commerce from Lakehead University in Thunder Bay, Ontario, and is a chartered accountant.
Thornton, 58, also serves on the board of HSBC Holdings Plc, the U.K.’s biggest bank, News Corp. and Ford Motor Co. He spent 23 years as an investment banker at Goldman Sachs, helping to build up their business overseas, and resigned from the firm in 2003.
Regent, a former CEO of nickel miner Falconbridge Inc. and senior managing partner at Canadian investment firm Brookfield Asset Management Inc., unwound Barrick’s gold hedges to allow the company to fully benefit from rising prices. He also spun off the company’s African assets and raised the quarterly dividend to 20 cents a share.
Still, like other gold-mining CEOs, Regent faced escalating production costs. In July, Barrick raised the estimated price tag of its Pascua-Lama gold and silver project on the Chile- Argentina border by $1.4 billion to a range of $4.7 billion to $5 billion. The company said last month it was reviewing the cost estimates again because of wage and raw-materials inflation. Production at the mine is scheduled to start in mid-2013.
Nor did the acquisition of Austrlia’s Equinox, for which Barrick outbid China’s’s Minmetals Resources Ltd., help to boost its shares. Barrick has dropped 15 percent since the deal was completed. Copper futures on the London Metal Exchange have declined 23 percent in the same period.
The Equinox deal was the second-largest for the company, after its $10.2 billion purchase of Placer Dome Inc. in 2005, according to data compiled by Bloomberg. Munk said in May 2011 at the Bloomberg Canada Economic Summit in Toronto that the acquisition was “unorthodox.”
“If you keep on doing orthodox things then all you do is you’re part of the herd,” he said.
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