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Barrick: Building a Beast Beyond Gold
“Copper is the most strategic metal, bar none, in every way.”

– Mark Bristow, CEO of Barrick Gold Corporation

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I've always been partial to base metals, copper in particular, as the bull case seems rather indisputable in the medium to long term. Numerous headlines throughout 2022 have confirmed that we headed for a supply deficit, and several major corporations such as TECK, VALE, Glencore, BHP, and even Barrick Gold have turned their eyes toward increasing production of the metal that is central to the energy transition.

Barrick was not a company that I had on my watchlist until I recently caught the interview below:

Kai Hoffman to Barrick CEO Mark Bristow, “You mentioned copper in your investor day presentation about 155x, and you’re called Barrick GOLD…?”

“It’s an underlying gold company, but 20% of our revenues copper and going to be 30%.
If you want to grow and be relevant, then you need to embrace COPPER. I think what COP27 highlighted is that you need mining. Mining is going to be the future of this planet, if we do it right, responsibly. Governments can’t develop countries but business people can. It’s a transition of how we generate power and that is the first step in liberating and developing nations.”


In the NYSE Closing Bell video, Bristow mentions that Barrick owns 6 of the top 12 gold deposits in the world, and is pointing towards equally significant copper assets that they are now growing:


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Just as I began to look into Barrick, a recent headline solidified my interest in the company:

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ISLAMABAD, Dec 9 (Reuters) - Pakistan's Supreme Court endorsed on Friday a settlement for Barrick Gold (ABX.TO) to resume mining at the Reko Diq project, one of the world's largest underdeveloped sites of copper and gold deposits, it said in an order.
The endorsement was a condition of the settlement for Barrick to resume work on the project in the southwestern province of Balochistan, bordering Afghanistan and Iran, in which it will invest $10 billion.

Chief Justice Umar Ata Bandial, the head of a five-judge panel, read out the operative part of the brief order in court.

"The agreements ... have not been found by us to be unconstitutional or illegal on the parameters and grounds spelt out," read the order seen by Reuters.
President Arif Alvi had asked the court to review the deal.

In an out of court agreement this year, Barrick Gold ended a long-running dispute with Pakistan, and agreed to restart development.

Under the deal, the company withdrew its case in an international arbitration court, which had slapped a penalty of $11 billion on Pakistan for suspending the contracts of the company and its partners in 2011.

The company's licence to mine the untapped deposits was cancelled after the Supreme Court ruled illegal the award granted to it and its partner, Chile's Antofagasta (ANTO.L).
Antofagasta had agreed to exit the project, saying its growth strategy was focused on production of copper and by-products in the Americas.


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Following last Friday's ruling by the Supreme Court of Pakistan, the government in Pakistan moved forward to approve a decision related to the project and settlement to clear liabilities of Antofagasta, who was a partner in the original deal but will now exit the project.

ISLAMABAD: Following the endorsement of the multi-billion dollars Reko Diq project deal by the Supreme Court of Pakistan, the federal cabinet on Tuesday approved the clearance of liabilities of Chilean firm Antofagasta, ARY News reported, quoting sources.
According to details, the federal cabinet approved an important decision related to Reko Diq project, allowing the authorities to clear liabilities of Chilean firm Antofagasta.

Sources told ARY News that the cabinet gave emergency approval through circulation. A total of more than $22.7 million of interest will be allowed to clear the liabilities, sources added. Sources added that the Finance Ministry has been directed to arrange the interest payable for Balochistan’s share. The finance ministry would arrange more than $8.5 million dollars, sources added.

Govt Holdings Pvt Limited (GHPL) have already raised Rs65 billion with government’s guarantee, sources added. Earlier on December 11, the Economic Coordination Committee (ECC) of the cabinet approved a payment of more than $900 million to the Chilean firm Antofagasta over six years to exit the Reko Diq project.

The committee also green-lighted about $1.91bn shareholder financing by state-owned enterprises (SOEs) to take the gold and copper mining project forward.

It was presented that Government of Pakistan and Balochistan government entered into an out-of-court dispute settlement with M/s Tethyan Copper Company Pvt Limited- a consortium of Barrick Gold Corporation of Canada and M/s Antofagasta PLC of Chile, in respect of Reko Diq Copper-Gold Project.

As per settlement terms, Government of Pakistan has to clear liabilities to Antofagasta PLC. In the light of the terms of agreed settlement, the ECC allowed Finance Division to direct GHPL (for its own as well as GoB’s share), OGDCL and PPL to deposit the aggregate amount of interest to the sum of $ 22,718,173/- in the escrow account from March 31, 2022 to December 15, 2022.


Barrick continued its streak of good news, as Moody's upgraded the senior unsecured ratings of the company on Wednesday:

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As Barrick increases its share of copper production from 20% to 30% in the near term, they stand to benefit significantly from the expected increase in copper prices. With the addition of Reko Diq, Barrick becomes one of the most interesting metal producers to consider adding to your watchlist:

"Once this has been completed and the necessary legalization steps have been taken, Barrick will update the original feasibility study, a process expected to take two years. Construction of the first phase will follow that with first production of copper and gold expected in 2027/2028.
“During the negotiations the federal government and Barrick confirmed that Balochistan and its people should receive their fair share of the benefits as part of the Pakistan ownership group,” Bristow said.

“At Barrick we know that our long-term success depends on sharing the benefits we create equitably with our host governments and communities. At Reko Diq, Balochistan’s shareholding will be fully funded by the project and the Federal Government, allowing the province to reap the dividends, royalties and other benefits of its 25% ownership without having to contribute financially to the project’s construction or operation. It’s equally important that Balochistan and its people should see these benefits from day one. Even before construction starts, when the legalization process has been completed we will implement a range of social development programs, supported by an upfront commitment to the improvement of healthcare, education, food security and the provision of potable water in a region where the groundwater has a high saline content.”
Finance Minister Ismail said the development of Reko Diq represented the largest direct foreign investment in Balochistan and one of the largest in Pakistan.

“Like Barrick, we believe that the future of mining lies in mutually beneficial partnerships between host countries and world-class mining companies. The Reko Diq agreement exemplifies this philosophy and also signals to the international community that Pakistan is open for business,” he said.

Subject to the updated feasibility study, Reko Diq is envisaged as a conventional open pit and milling operation, producing a high-quality copper-gold concentrate. It will be constructed in two phases, starting with a plant that will be able to process approximately 40 million tonnes of ore per annum which could be doubled in five years. With its unique combination of large scale, low strip and good grade, Reko Diq will be a multi-generational mine with a life of at least 40 years."


52wL $17.88
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Close Dec 14 $23.59
Yield 3.05%
Dissecting the Markets's avatar
The political instability and the energy crisis are big concerns I have for Barrick's investment in Pakistan. Thoughts on those issues?
Jennifer's avatar
@dissectmarkets I would agree regarding the political instability. I tend to weigh the risk/reward and allocate accordingly (max 2% of my PF here). In this case, it's certainly a positive to have the Supreme Court ruling in their favour, government ownership in the project, as well as progress quickly being made on this front: "The committee also green-lighted about $1.91bn shareholder financing by state-owned enterprises (SOEs) to take the gold and copper mining project forward." Insurgents in the region are definitely a concern but as Bristow and many other successful mining magnates have commented, the best deposits are often found in risky jurisdictions and it's the companies that have demonstrated success in these types of projects that are worth consideration.

Regarding the energy crisis, higher costs did indeed impact metal producers' bottom line in 2022 and likely will in 2023 and beyond. However, if you're a gold and/or copper bull then investing in companies like Barrick may seem worth the risk given the outlook for metals prices. I would not consider Barrick if they had no copper exposure, but given their interest in growing their copper portfolio, I felt they were worthy of a small allocation in my book.
Rihard Jarc's avatar
Thx for sharing never dived deep into Barrick but wouldn't have thought that 20% of their revenue is Copper and that they plan to have it as much as 30%.
Jennifer's avatar
@rihardjarc Honestly, that was a recent revelation for me too and I'm pretty excited about it!
Rihard Jarc's avatar
@jennymanydots Yeah again just goes to show never judge a book my it's covers.
Reasonable Yield's avatar
Great work Jenny!
Nathan Worden's avatar
Great memo! I'm also surprised that Barrick Gold has so much revenue coming from copper.
Jennifer's avatar
@nathanworden As was I, Nathan (and thank you)! Without knowing the extent of their copper revenue/growth plans and hearing the exciting new developments regarding Reko Diq, I may not have looked at it. Now I believe Barrick might just be an outstanding long term hold - though I will be monitoring the jurisdiction risk in Pakistan closely!

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