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September 22, 2013 5:26 pm
The Canadian group is to move oversight of operations to its head office, in a restructuring designed to make mines more accountable for controlling costs and increasing cash flow.
Gold miners around the world are cutting costs and rethinking expansion plans because a sharp fall in the gold price this year has made many mines unprofitable, while production costs have escalated substantially, partly because the global resources boom drove up wages and equipment costs.
This week, 120 gold explorers and miners including Barrick are meeting investors at one of the industry’s most important annual gatherings, the Denver Gold Forum. They will try to persuade investors that they have contingencies to cope if prices resume their slide.
Collectively, the world’s largest gold producers have reported billions of dollars of asset impairments, led by Barrick, which lost $8.6bn in the second quarter after an $8.7bn writedown.
Barrick has already cut about one-third of head office staff and cut $2bn from its capital budget for this year. It has sold three mines in Australia and is expected to look at further sales or closures as it focuses on its largest, lowest-cost mines.
Jamie Sokalsky, Barrick’s chief executive, said regional restructuring would help bring mining assets on four continents “closer to Toronto”, cutting complexity and emphasising long-term efficiency and lower costs.
“This structure ensures that our mining leaders are able to focus their full attention on achieving the best possible operational results,” he said in a memo to Barrick employees.
Investors are unhappy at big cost overruns at Pascua Lama, Barrick’s troubled mine project being built high in the Andes. Some investors are also concerned at the company’s corporate governance and the influence of Peter Munk, Barrick’s founder and chairman, who has said he will put in place a succession plan but has given no timetable. John Thornton, the former Goldman Sachs banker, was named co-chairman last year.
Barrick has said it will cut production costs this year by about 10 per cent, or $100 per ounce produced.
It has also installed new management at African Barrick Gold, a UK-listed subsidiary which it failed to sell this year and whose mines have some of the highest costs of the world’s largest gold producers.
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