Barrick Gold Pops on Board of Directors Shake-Up

Michael Teague  |

Ahead of the eagerly anticipated announcement following the conclusion of Wednesday’s Federal Open Market Committee meeting, gold futures were at their lowest in nearly six weeks.

The price of the yellow metal dropped once again to below $1,300 before rebounding slightly. The consensus expectation has clearly become that the “taper,” in other words the beginning of the end of the central bank’s $85 billion in monthly asset purchases that has been holding up bond markets and gold while keeping interest rates at historical lows, is set to be announced on Wednesday afternoon, to the tune of $10-$15 billion. That consensus turned out to be wrong, however, as the Fed announced plans to continue the stimulus at present levels.

The brutal end of gold’s more than decade of prominence has come about thanks to what could be called a true concatenation of bad-luck events, not least of which was the Cyprus banking crisis earlier this year. But by far one of its biggest obstacles has been the endless, often frightened speculation about the end of Quantitative Easing. In any event, both situations have been able to undermine the traditional view of gold as a “safe haven” for investor cash.

This environment has also put a great deal of pressure on gold mining firms, as well as their shares.

According to two anonymous investors who spoke with Bloomberg early on Wednesday, the world’s second-largest publicly-traded gold miner, Canadian firm Barrick Gold Corporation (ABX) , is under pressure from shareholders who include some of that country’s largest pension funds, to replace long-time directors, some of whom have held their seats for around two decades.

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Robert Gill, a Toronto fund manager whose firm Aston Hill Financial ($AHF) holds shares of the company, summed up the concern with Barrick, saying that “tenure on the board is far too long and there are far too many non-independent directors.”

The second quarter saw the company write down almost $9 billion, while slashing its dividend to 25 percent of what it had previously been, as gold prices tanked. Shareholders are also calling for tighter scrutiny of executive pay, and founder Peter Munk has announced his upcoming departure from his position at the head of the company, though an exact date or even a timeline has yet been given.

For the time being, the company’s board of directors seems to be at the very least trying to appear as though it is in agreement with the demands of its shareholders. The extent to which it is serious about bringing on new board members who do not have longstanding connections to Peter Munk and his circle will be measured by how much or little the company’s current board drags its feet in taking concrete action. So far, this has been promised for the end of the year.

Shares for Barrick jumped on the news, up nearly 4 percent to $19.05 in midday trading. The stock’s price has been cut nearly in half so far in 2013.

Gold stayed flat after rallying from its dip below $1,300 per ounce, up 0.05 percent to $1,310.10.


[Image: Barrick's Tulawaka Goldmine, courtesy of Wikimedia Commons]

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