Enterprise Risk Management at Barrick
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Case Details:
Case Code : ERMT-015
Case Length : 16 Pages
Period : 2003
Pub Date : 2003
Teaching Note :Not Available
Organization : Barrick
Industry : Gold
Countries : USA
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Background Note Contd...
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American Barrick discussed merging with Newmont Mining in 1991, but the talks
were called off. In 1994 it purchased Lac Minerals Ltd., which included Chilean
mines in South America's richest gold belt.
By 1995, when the company was renamed Barrick Gold, it had become the largest
gold producer outside South Africa.
Also in 1995 the company acquired a 40% stake in the High Desert Property, now
the Newmont/Barrick HD joint venture, in Nevada.
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Barrick paid $800 million in 1996 for Arequipa Resources, which owned the
Pierina Mine in the Peruvian Andes. It also bought Chile's Pascua Mine and
expanded its presence in Argentina.
Barrick had a stroke of luck in early 1997 following failure of talks to develop
the Busang project in Indonesia with fellow Canadian firm Bre-X. The project was
later discovered to be the mining industry's greatest fraud.
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When gold prices plunged in 1997, Barrick announced plans to close
mines in Chile and the US -- cutting about 42% of its workforce.
With gold prices still very low in 1998, milling operations were
suspended at the Pinson Mine in Nevada.
Barrick also reached a joint venture agreement with Anglo American's
gold subsidiary, AngloGold, to develop Barrick's potential gold
properties in Congo, Mali, Niger, and Senegal. This reduced
Barrick's exposure in the unstable region. |
In 1999 Barrick moved into Africa with its $281 million acquisition of Sutton
Resources, owner of the Bulyanhulu property. It also exchanged some land in the
Carlin Trend with Newmont.
Barrick's hedging practices came under attack from investors in 2000, despite
company estimates that it earned an additional $391 million through hedging in
1999 and another $300 million in 2000. A lawsuit was filed against the company
that it had been actively and deliberately suppressing the price of gold.
In 2000 Barrick acquired Canadian gold exploration company Pangea Goldfields,
including operations in Peru and near Bulyanhulu in Tanzania. Production began
at Barrick's Bulyanhulu mine in 2001.
Barrick also acquired rival gold producer Homestake Mining in a $2.3 billion
stock deal during the year. The company announced a rich strike at its Alto
Chicama gold property in Peru in 2002. Barrick closed its El Indio, Bousquet,
McLaughlin, Ruby Hill, and Agua de la Falda mines in 2002...
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