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Barrick Gold cuts spending, may suspend troubled Pascua-Lama project

Section: Daily Dispatches

By Madhavi Acharya-Tom Yew
Toronto Star
Wednesday, April 24, 2013

Facing sliding prices for gold and its shares as well as a shareholder revolt on executive pay, the top brass at Barrick Gold Corp. vowed Wednesday to cut costs and take a hard look at the company’s operations.

Executives of the world’s biggest gold mining company revealed plans to cut at least US$500 million from spending on major projects this year, and may consider suspending work at its troubled Pascua-Lama development in South America.

"I can assure you that everyone within Barrick shares your disappointment over the share price performance and we will do everything we can to reverse that," president and chief executive officer Jamie Sokalsky told shareholders at the company's annual general meeting, held at the Metro Toronto Convention Centre.

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"2012 was a difficult year for Barrick and we face significant challenges. Some are out of our control and some within our control."

The pledge came as the Toronto-based company reported a decline in net earnings for the first quarter of 2013, driven by lower prices for gold and copper.

Barrick stock gained $1.37 to close at $19.38 per share on the Toronto Stock Exchange on Wednesday. The shares have lost more than 40 per cent of their value since the start of this year.

Barrick declared a dividend of 20 cents (U.S.) per share on Wednesday.

At the meeting shareholders voted down a motion by the company that asked for approval on the way Barrick pays its executives.

Last week institutional investors, including the Canada Pension Plan Investment Board, the Ontario Municipal Employees Retirement System, and Ontario Teachers Pension Plan, expressed concern over an $11.9 million signing bonus awarded by Barrick to co-chairman John Thornton.

The "no" vote was advisory and "doesn't impact any compensation," Andrew Lloyd, director of media relations, wrote in an email to the Star. "The Barrick board of directors takes the shareholder vote seriously and intends to carefully consider our shareholders' perspectives regarding executive compensation matters."

A spokesperson for the Caisse de depot et placement du Quebec, which led the charge, said the group was "thrilled" by the rejection.

"We knew that it was a consultative vote. We said this was a matter of principle in making ourselves heard and sending a message that there are things that shouldn't be done," Marie Giguere, executive vice-president, said in an interview. "In corporate governance things don't change overnight. It's a slow process but this is a first step."

The bonus, paid last June, was used to purchase Barrick shares that are held in trust for Thornton's children and are subject to a holding period, according to the company's latest management proxy circular.

"John was prepared to give up his other options. Believe me, he was a highly desirable, well-known commodity," Barrick founder and chairman Peter Munk told shareholders. "When we paid the kind of money we paid John to buy Barrick shares with, we had to secure him."

At the start of the meeting, two protestors slipped on stage and unfurled a banner that read "No Pascua-Lama" before being rushed away by security guards. Outside about a dozen protestors stood in the rain chanting "Divest from Barrick."

Barrick had US$923 million or 92 cents per share of adjusted earnings in the first quarter, down from US$1.1 billion or $1.10 per share in the year-earlier period. The results beat analyst estimates.

Barrick said it would cut its capital spending by $500 million and reduce exploration spending by $100 million.

Work on the Pascua-Lama silver and gold development in the Andes mountains was suspended by an appeals court in Chile amid environmental concerns. Barrick said it will work to address the regulatory concerns.

"We're serious about disciplined capital allocation," Sokalsky told shareholders. "That means we need to consider all options, including the possibility of suspending the project."

Gold futures are trading close to US$1,400 per ounce, after touching a high of over US$1,900 in 2011.

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