Unhappy with its share price, Barrick may diversify

Lumber milling for paper might fit right in with the company's strategic plan....

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Barrick Share Price
May Spark Diversification

By Cameron French
Reuters
Wednesday, May 2, 2007

http://ca.today.reuters.com/news/newsArticle.aspx?type=businessNews&stor...

TORONTO -- Barrick Gold Corp. may eventually consider expanding further into other non-gold precious or base metals production if its share price continues to underperform, company chairman and founder Peter Munk said on Wednesday.

Speaking at the company's annual meeting in Toronto, Munk said the stock's performance over the past five years has not reflected the company's profit performance and rich project pipeline as Barrick has risen to become the world's largest gold producer.

He said he believes the shares will gradually be awarded a better valuation as the market comes to the realization that the recent rise in gold prices is not a cyclical blip but a sustained move.

But if that doesn't happen, the company may have to eventually consider expanding its production profile to take advantage of capital inflows into other mining sectors.

"We'd never give up our leading position (in gold), but we can easily expand into other areas. We don't have constraints, because we've got the means, the balance sheet, and the track record of mining which Barrick enjoys is second to none," the 79-year-old Munk told reporters after the meeting.

"The fact is that this company's mandate ... is to create shareholder value."

Speaking earlier at the meeting, Chief Executive Greg Wilkins said the stock price malaise was likely due to a combination of factors, including a preference by investors to bypass gold companies and invest directly in the commodity itself.

He also said Barrick's past acquisition spree -- including the takeover of Placer Dome last year, which vaulted it to the top rank of gold producers -- could be weighing on the shares. He said investors have shown a preference for small and mid-tier miners that look set for stronger growth and also boast a premium as possible acquisition targets.

While the shares are down about 8.4 percent so far this year, they shot up 5 percent on Wednesday, following Barrick's release of first-quarter earnings late on Tuesday.

The company reported a rare quarterly loss due to a $557 million charge to fully exit its hedge book on current production, a move that means that current production and sales will be at spot prices rather than at previously contracted lower prices.

Analysts said the results, which were released after markets closed, were in line with or above expectations, as the company's cash costs were lower than forecast.

Barrick's results also followed disappointing earnings last week from Newmont Mining Corp., the world's No. 2 gold producer, which had led some to believe that Barrick might have a more difficult time on the cost-containment front.

At mid-afternoon on Wednesday, Barrick was up C$1.69, or 5.4 percent, at C$32.84 on the Toronto Stock Exchange.

The company also said on Wednesday it will raise its annual dividend by 36 percent to 30 cents per share.

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