Board changes expected at Barrick should boost investor sentiment

TORONTO, Cananda - Changes to the board of Barrick Gold, expected to be announced Wednesday, should improve sentiment toward one of Canada's biggest gold miners, which has been battered by high costs and weak gold prices.

Analysts say investors are likely to get behind the new directors, which are rumoured to include Ned Goodman, president and chief executive of Dundee Corp. (TSX:DC.A).

Reports have also suggested founder and co-chairman Peter Munk will step aside, along with former prime minister Brian Mulroney and one other director.

Ian Nakamoto of MacDougall Investment Counsel Inc. said such changes would provide good optics for investors frustrated with the gold miner's performance.

Shares in the company have fallen more than 50 per cent so far this year.

But how quickly shareholders embrace the changes will depend on how many board members are leaving and how long their tenure has been, as well as whether institutional investors had any say on the replacements.

"The longer the tenure, the more responsibility they have to take with the situation Barrick faces now," Nakamoto said.

"Someone's got to take the responsibility, because it was under their tutelage that Barrick got into this long restructuring."

John Ing, president of Maison Placements in Toronto, said the possible addition of Goodman as a director and James Gowans, a former De Beers Canada chief executive, as chief operating officer, would be welcome given their experience with mining.

"The additions of Gowans as a COO harkens back to when they had Bob Smith and his team," he said, referring to Barrick's legendary president from 1987 to 1996, who helped build the miner into a global powerhouse.

"There is a need with 24-odd mines scattered around the world for somebody with a mining background, which he does have."

Barrick (TSX:ABX) hasn't commented on the reports other than to say that it will provide an update following a board meeting Wednesday.

The company has faced pressure since before its annual meeting earlier this year when shareholders voted against a largely symbolic executive pay resolution.

It has been working on improvements to its corporate governance, with changes expected to take effect at its next annual meeting.

Barrick currently has seven independent directors on its 13-member board.

The company has faced significant challenges this year as it has struggled with a falling price of gold and challenges at its operations.

It was forced to slash its dividend and take more than US$9.3 billion in write downs or other impairment charges this year, while also suspending most of the work at its massive Pascua-Lama project in South America.

Munk, who founded Barrick three decades ago and built it into one of the world's largest gold miners, has signalled his desire to retire from the board with his fellow co-chairman John Thornton widely expected to fill the role.

What role Munk will play around the company, even if he does step aside Wednesday, is still to be seen.

"Thornton was appointed by Mr. Munk so some investors may view that as pseudo-representing Peter Munk, but we'll have to see what he does," Nakamoto said.

"He's a very successful investment banker, he has deep ties to China. If he is able to get the Chinese interested in their properties or become major shareholders, he will have more than earned his stripes."

One model Thornton may help Barrick follow, Nakamoto suggested, is that of Teck Resources Ltd. (TSX:TCK.B), which sold a large stake in the company to China Investment Corp. in 2009 in the wake of the financial crisis.

Thornton joined the board at Barrick in February 2012 and was appointed co-chairman five months later.