BARRICK Gold increased the dividend another cent for the third quarter, but the group’s CEO, Mark Bristow, said investors could expect a conservative approach to capital allocation as the political environment had become more unstable, especially in the US.
“It’s ironic, Barrick has the strongest balance sheet in the industry – not just in mining – but we are being more conservative than most because it’s at times like this you think you can conquer the global crisis,” said Bristow in an interview.
“But we are in unprecedented times, so this is a time of getting back to what is sustainable. The US has become less secure as a destination right now. It is very fluid. If there’s a change in government and they close down the US, that’s not a good place to be,” he said.
US president Donald Trump has sought to fire up his hardline supporters ahead of a possible legal fight that may contest the outcome of elections in key so-called ‘battleground states’. His Democrat Party rival, Joe Biden, has promised to fight the legal action in court.
Barrick increased the dividend 12.5%, or a cent, to nine US cents per share following another strong quarterly showing. It was the third increase in the dividend this financial year, and a tripling in the payout since the merger of Barrick Gold with the firm Bristow founded, Randgold Resources, nearly two years ago.
The improvement in the payout came on the back of a 78% increase in net share earnings to 41 cents for the third quarter in which gold production totalled 1.16 million oz. This took year-to-date gold production to 3.6 million, within range of the 4.6 to five million oz in production guidance for the year.
The average gold price received was $1,826 per oz in the quarter which compares to the average gold price of $1,725/oz in the second quarter. With costs controlled, the outcome was record free cash flow of $1.3bn. Net debt as of period-end was reduced to $417m from $1.46bn as at the end of the second quarter. Barrick expected to be net cash during the first quarter of 2021.
Bristow said the firm would discuss a new dividend policy at its annual general meeting. “We have to find a formula where the dividend is sustainable. For me, paying a 9 cents/share dividend is sustainable; it’s not something we go back on,” he said.
Bristow met with the interim Mali government which last week mooted the idea of a review of mining concessions that had been signed during the administration of former president, Boubacar Keita. “The key thing is that it’s a review,” said Bristow. “The attorney-general is doing his job.
“I met with the interim president and his government [Barrick is the largest single corporate taxpayer in Mali]. The new government is young, committed and wants to make a difference in the next 18 months before handing back to the democratically elected government,” said Bristow.
Keita was toppled from government in July after a year of unrest linked to allegations of state corruption.
Commenting on the firm’s joint venture with the Tanzanian government, Twiga Minerals, Bristow said there had been a windfall as the company’s mines – mostly North Mara and Bulyanhulu – sold the remainder of locked-up gold-in-concentrate. Gold exports were embargoed for about two years previously.
Twiga’s contribution to revenue would, however, remain even in 2021 as Bulyanhulu ramped up to full production of about 270,000 oz/year, taking Twiga to 500,000 oz/year in annual production, said Bristow.
In October, Twiga Minerals paid a maiden dividend of $250m.
The company is 50% owned by the Tanzanian government in terms of an agreement with Barrick is share equally in the economic benefits of mines previously controlled by Acacia Resources. Barrick bought out Acacia minorities in 2019 ending a long-standing tax dispute with the Tanzanian government.
The dispute was driven by Tanzanian president, John Magafuli, who was today sworn in for a second term after winning national elections last week, albeit disputed.
Barrick expected a stable operating environment in Tanzania. “The people see the benefit of us being there. I don’t know how it was possible to not make a profit from Bulyanhulu,” Bristow said of Acacia Resources.