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Bristow: “We’ve got lots to do”

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Mark Bristow, who had been the chief executive officer of Randgold Resources, became the president and CEO of Barrick Gold Corp. in January of this year, and since then he has made it clear to the people of northern Nevada that he does not believe in management from a distance. In August he made his fifth visit to the Elko area this year.

For this visit, he invited Nevada Gov. Steve Sisolak to come to northeastern Nevada. Sisolak accepted the invitation, and on Aug. 6 Bristow and the governor toured the Cortez Mine.

On Aug. 7 Bristow visited the Long Canyon Mine to check on the operations of this youngest mine in the Nevada Gold Mines portfolio.

Before flying to Henderson the afternoon of Aug. 7, Bristow sat down for an interview.

It’s been a good year for Barrick. During the second-quarter earnings announcement on Aug. 12, Bristow said, “It’s been a fun six months. Today, I’m glad to share with you the enormous progress our teams have made.”

At the Aug. 7 interview in Elko, Bristow shared some of his thoughts on how Barrick will stay focused to continue to make progress, along with talking about a variety of other topics.

Q: The price of gold climbed past $1,500 an ounce today. How does the price of gold affect the gold mining business?

I’ve been saying for a long time the risk on the upside is higher than the risk on the downside of the gold price. If you look at the longest bull market in the U.S. ever, and the strong dollar -- it doesn’t last forever, unfortunately, no matter what people claim.

The dollar drives the gold price to a large degree. And then you look at the other driver of the gold price, which is the view of the global economy. We’ve seen a global economy that’s pretty confused, and has been for some time. The inward-looking nationalist politics around the globe and populism driving decisions -- rather than the responsible balancing of the leading global economies -- is all creating risk, and gold prices are a very good barometer of risk.

So you’ve got this very open and hostile fight in the U.S., which is the biggest economy in the world, despite what everyone always wants to say. And then you’ve got this very confused Europe and Brexit debate, and the slowing down of the China engine, which drove us from 2005, the middle of the last decade, to 2012, 2013, and we’re seeing it very, very clearly cooling down. I’ve got no doubt the other Asian economies will continue to support that.

But the world is in a transition. And so is the global balance … the economic balance. It’s a very interesting time.

That’s the demand side. And then you add to that the supply side. And we’ve seen more and more emerging market banks, central banks buying gold, but it’s the supply side that’s critical.

That was one of my strategic objectives of engaging with Barrick to create the combination of Randgold and Barrick and focus on tier one assets.

The industry neglected in reinvesting in itself, it had the hedging crisis, and then you had the whole crisis of the abnormal exuberance of the Chinese bull market, where everyone overpaid. They did very bad deals and the market sort of just shut down on the gold industry. So people have been focused on repairing their businesses and not investing in the future.

And so the industry suddenly finds itself -- when you look at the average life of mine, it’s 10 years, and it takes longer than 10 years to fully permit a tier one asset.

I reckon everyone’s clear about peak gold, and peak gold is a reality, despite the gold price and all that. Because what happened as China drove the gold price up to $1,700 is the industry used the higher gold price to warrant investing in capacity, but didn’t replace the reserves. So now you’ve got a lot of capacity mining and processing very low grades, and you’re running out of reserves. So you’ve got no more flexibility, whereas at the turn of the century you had the ability to low grade and still supply the demands. And I’ve always claimed that the gold industry is demand-supply driven, although it’s elastic.

We’re not changing our numbers. Randgold used a $1,000 an ounce long term gold price in allocating its capital; Barrick used $1,200. So these higher gold prices probably will support a $1,200 long term gold price. We’re very clear about long term gold prices. We don’t try to predict higher gold prices at all.

Nevada Gold Mines is sitting on a lot of gold, and what’s even more exciting than the reserve base is the visible, tangible resource opportunities for conversion into economic deposits, and then the exploration potential as well. You just go look at Goldrush, literally a mile away from Cortez, which has been operating since 1862. We discovered Goldrush literally on its back door 150 years later.

So there are still, I believe, lots of discoveries still to be made in this part of Nevada.

Q: How was today’s visit to the Long Canyon Mine?

Long Canyon is a small operation, a Newmont acquisition from Fronteer. It’s a classic example of what the industry paid for -- small deposits at the peak of the boom. The challenge there -- it’s a profitable mine, but it’s got a finite life, and it needs quite a bit of permitting to be able to ensure that we can extend its life to its optimum end, so that we’ve mined out the ore body properly, and that’s what we were looking at today. So there’s quite a bit of work to do before we can pass judgement on that.

Q: What feedback have you heard on the joint venture so far?

I think there’s absolutely no doubt that it was the right thing to do. And the exciting part of this is that the employment base is the real beneficiary.

The challenge now is how do we – one of my big objectives is to insure that we connect the community and the employees back into the organization, because it’s a very integrated industry. We reach far into communities.

It was very interesting for me to see the governor get his head around the issues here, and also the wealth and opportunities that we’ve created. Sometimes the communities and even our own workers are blinded to them.

As you know, I’m very passionate about promoting who we are. And I think what was very clear -- we’ve already identified that, that’s why the governor was here -- we need to get down south and also take our position and promote ourselves as a very significant component of this part of the state’s contribution to the state’s economy -- and the importance of insuring that we invest in the skills base of the state as a whole. And also we should be looking to sourcing and building out our relationships across the state.

And we had the secretary of interior here from the federal government just recently. Again, there’s a recognition of the importance of this part of the world, as far as a mining center goes, and a center of technical excellence.

I’m excited that we’ve got lots to do and we’ve got lots to do it with in the form of resource potential.

Q: The governor has not had much of a background in mining, and it sounds like he learned a lot during his visit here.

He is a businessman, and he was very honest in what he saw. I don’t think anyone would have believed that he would have been so perceptive of what it’s all about up here in the north. I think we’ve been living in too much isolation.

The fact that he made the effort to come and have a look, and engage with the people up here in the north is important. And his advice was very good -- no one really understands what you’re doing here, this is a very capital intense industry, and we should be proud of it. It pays well, and it makes a significant contribution to the communities.

The interior secretary also, he saw the merit in ensuring that we enable business, which is something that he’s worked on even as the undersecretary. He came out and spent time with us.

Nevada Gold Mines made the deal on the 1st of July, and in this short time we’ve received an unsolicited visit from the federal government on specific initiatives, and an acceptance of an invitation to the new governor from the south. So that’s not bad. I don’t think anyone should complain about it.

Q: I’ve heard about bringing in new managers at the Nevada mines to re-plan the mines and optimize the ore bodies.

Both companies, Newmont and Barrick, had different styles. One, Newmont, was a much more centrally controlled business, driven by a whole lot of gates, decision phases. And Barrick was all about high-grading to maximize cash flows to pay down their debt. And neither of those two philosophies are sustainable, certainly from my point of view.

Because as miners you are mining an ore body, and it’s very easily destroyed if you don’t optimize it properly, and plan and allocate your capital accordingly. And the gold industry, remember, destroyed more than its current market cap in the period from 2011 to today, because of exactly that.

What we have clear in our mind is that you optimize the ore body and you allocate capital accordingly on a long-term gold price that you believe the industry can’t survive below. Then you’ll ride out the cyclicality of the gold industry, because our viability is tested often twice. Once with the revenue side, which is the gold price -- so the quality of the ore body is all important because that’s your only control of revenue. And then on the cost side, with input costs, whether it’s fuel, which was a very big driver in the early part of the century -- and they change from time to time.

So we believe that we model our business long-term, with a set of parameters that sets us apart from the industry, so that if the gold price is going to get anywhere near that, we’ll be the last to stop making money, and that’s how we manage our business.

So therein lies the importance of understanding your revenue line, which is your ore body. And that is why mineral resource managers are an absolutely critical component of mining, because you need to understand your revenue line first, and then after that you can worry about how you extract it, and how you process it. But the one thing that is absolutely clear is you can’t put gold in the ground, so you need to understand how much is there to start with.

My view is -- and I tell it to anyone who wants to listen, even to those who don’t really want to listen -- that we don’t want people coming to work to do a job. We want to make people part of our business, so that they come to work to participate in that business, and therefore they are making decisions alongside their colleagues because they understand why they’re doing it.

We’re still not there yet – because you sit on a management team, and not everyone knows the numbers. You can’t run a business without numbers. You can’t make a contribution of making your company more efficient if you don’t understand the numbers and where you can impact those numbers.

And so it’s important, so that’s what we’ve been doing, and you’re already seeing the benefit of that. Immediately, we’ve had a quarter one out of the blocks, it was a robust delivery. We’re presenting the quarterly results on Monday, and there’s nothing to believe that we won’t repeat that.

Q: I read that you’ve changed all the general managers at the Barrick mines. Does that apply to Nevada Gold Mines also?

Yes … We’ve brought in new people. If you want to change something you need to have people who are aligned, and have the energy.

I’ve always said, often it’s good to just take out the top, because our industry is such an old-fashioned industry. And what I’ve done my whole life is give people who are smart, and accountable and interactive, opportunities, and the industry often doesn’t allow that to happen because it’s a bit of a boy’s club. And so what we’ve done is break that open and look past to people who really are capable of leading the teams and grasping what we want to do.

Again, I don’t believe that the corporate office should be directing the businesses on a remote-control basis. The ownership of the businesses mine-by-mine needs to be where the mine is -- things like the ore bodies, the way we interact with people and so on.

And you’ve seen, Greg (Nevada Gold Mines Executive Managing Director Greg Walker) is our leader here in Nevada, and he’s moved here with his family. I’m not big on remote control. You see I spend a lot of time here because it’s important. Because you can’t understand mines from sitting in a head office somewhere.

Q: When I visited the Long Canyon Mine, they said that around 10 people who used to work on various aspects of the mine from the office in Elko are now working at the mine site. Has this happened at other mines, also?

At all of them. So we’ve changed the whole management team. In Nevada we’ve done it, but we’ve also done it right across the Barrick group (worldwide).

Q: You’ve commented in the past on the importance of getting younger people involved in the industry.

Yes, I think this industry is an aging industry. This is such an exciting opportunity. One of my drivers, one of my simple objectives in doing this, driving this combination – (is that) Randgold’s resources succeeded because it managed itself differently and in a more modern, agile way than the rest of the industry, although it was focused in sub-Saharan Africa.

This industry cannot continue as it is. The world is changing too quickly … we’ve got to bring in young people. Because if you’re really going to stay profitable, you’ve got to introduce new technology, you’ve got to look to automation.

We are now getting there in Barrick. In Randgold, we had real-time data, so we made decisions on the button, instantly. Our decision making time frame was a shift, within the same day, whereas Barrick’s decision making was largely after a 30 day period, because they were looking backwards on monthly reports. And you can’t run modern businesses -- it’s too dynamic to be able to run businesses like that.

Young people are important in being able to introduce that sort of agility. And also, a 55-year-old engineer doesn’t do automation that easily. There are some exceptions, but a 30-year-old, he or she is not scared of it -- and we’ve seen that.

There are some exciting innovations we are leading here now. We will be running out a new database, fully integrated, to ensure that we give our managers on the front line real-time data.

And at the same time, we moved the Barrick innovation back into the operations and took it away from a separate stand-out division. And already we’ve seen the benefits of that.

Compartmentalized throughout Nevada Gold Mines we are doing some very innovative stuff. We were at Cortez the other day, we were drilling, automatic, and the guy was running the blast hole drilling from the office on a fully remote drill rig.

With our truck haulage automation now, it’s been hard work, but we now have an ability to run automatic trucks in amongst manned trucks, which is the first time ever.

And we are really progressing with our self-miners, particularly at Turquoise Ridge, where it’s not good ground -- you don’t want blasting there, you’d rather do mechanical mining. Again, we’ve put the demands on those engineers to make sure that we deliver on efficiencies and it’s not just an exercise in showcasing automation.

So I think we’re not quite there yet, but if we take the whole group, we have automation … that combined would create a fully automatic mine.

Goldrush is going to be a very interesting project as we roll it out, because you get to introduce that right from the beginning, and you don’t have to retrofit your mining business.

That’s the future of mining.

I’ve always said, and I said it this morning, and last night -- we don’t want to be at the back of the queue at the university graduation ceremonies. If we really want to remain relevant, we need to get in front and attract those very bright young people into our organization.

Q: Is anything new being done to promote safety at the mines?

One of the things I’m very keen on is making sure that our workers understand that if they want to work with us they need to also look after their own health. They need to be fit.

We haven’t got a good safety record, and a lot of that is because people are actually not in a physical condition to look after themselves. And how can you want to come and work and drive big trucks and do heavy engineering work when you can’t even help yourself up the stairs?

That whole industrial health part of our business is a very critical part for us, and for me particularly.

Both Newmont and Barrick don’t have good safety records relative to our other mines around the world, even in Africa. And it’s because of … there’s a very paternal way of doing things.

What we’ve introduced is, if you break our safety rules, you don’t have a job. Because this is a serious business. We want to be the best, we want the best people.

This is not about counseling. This is about, if you’re going to drive a 300-ton truck, and you break our laws, you don’t drive that truck, because it puts other people at risk.

There’s a different philosophy -- that’s what we’ve been introducing.

As you know, America is very regulation driven, and we are very committed to making sure we are well within the regulations. But at the same time, there are also specific impacts that we want to measure that might not be driven by regulations, but it might impact you in your health. Whether that’s dust or noise, or we mine ores with mercury and other deleterious elements, and we need to manage that, and so we do that.

You’ll see all that because that’s part of our value set.

Q: Last week we received press releases about a settlement that was reached in South Africa in a class action lawsuit for gold mine workers who were exposed to silica dust. It was South Africa’s first class action lawsuit for sick workers. Have there been fewer regulations in countries like South Africa than in the United States?

No, I think South Africa is very highly regulated, certainly post-apartheid. The whole silicosis issue, this goes back a very long way in South Africa’s history, and I think that’s a very real thing in these deep mines, there’s a lot of it. It’s very complex, the current situation, when you look at the regulations. It’s an independent country that received its independence and its real rights back in ‘94, so generations past. So all those claims are South Africa joining the litigious world.

I think it’s a message for all of us, and I’ve always said that -- I’m an African, I grew up there -- you shouldn’t think that there are different standards for different places that you operate. Barrick as a company is very clear -- it seeks to apply its own standards which are in line with IMF, World Bank, United Nations standards, or other bodies like ICMM and so on, or the host country, whichever is the highest. That’s how we look at it. So we won’t go into an emerging market country and think we can exploit the situation.

Q: I’m somewhat surprised that you said Barrick and Newmont don’t have good safety records relative to other mines. It seems like people are a lot more serious now about safety than they used to be, but I guess you’re saying that there’s still a ways to go.

Exactly that. And I think what I’m telling you is that we take it very seriously.

Where I come from, any injury, I knew about. It wasn’t a statistic. It was a real, bad experience. You don’t want anyone to get hurt at work.

And we definitely don’t use accidents to exploit a day at home. You should not have those accidents.

And when people are pulling an arm muscle because they’re cleaning a window of a car -- we’ve got too many out of shape people working in our organization, so we’ve got to encourage them to get healthier. And I think right across the group we’ve introduced this discipline. We need to be clear that we’re a professional organization, this is a heavy industry, everyone is qualified to come to work … and they should act professionally in every aspect of their daily work, including adhering to our safety rules.

So we’ve gone through a refresher, making sure everyone understands, and we’ve got different levels of warnings. But when you put other workers in danger, you’re not going to work for this organization. That’s the best way to control it. People learn very quickly.


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