| More than many of its peers, Barrick has a growth strategy that leans heavily on grassroots exploration, which involves earlier-stage fieldwork as pictured above. Source: Greenfields Exploration Ltd. |
Barrick Gold Corp.'s planned spending on grassroots exploration jumped 51% this year as the No. 2 gold producer prioritized growth at its existing assets, especially in the U.S. and Africa, over mergers and acquisitions.
Barrick ranked second on grassroots spending plans among all mining and exploration companies, with $121 million targeting earlier-stage projects. The gold miner's total 2022 exploration budget was $288 million, the fourth largest among mining and exploration companies this year, according to S&P Global Commodity Insights data, but it was the grassroots budget that stood out. Barrick's plans exceeded gold mining peers in the same category by at least $45 million.
Kinross Gold Corp. had the next-highest grassroots exploration budget this year among gold miners, at $76 million.
"[Barrick] very much bucked the trend of the industry and, in particular, its peer group," said Commodity Insights analyst Kevin Murphy, referring to its grassroots exploration budget.
Avoiding pricey deals
Mark Bristow, Barrick's president and CEO, has long emphasized exploration and discovery as key to a miner's longer-term success.
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While Bristow is no stranger to mergers and acquisitions — he
"And a lot of those transactions were done at assumed prices above what the spot [gold] price is today," Bristow said during a Nov. 3 earnings call, without being more specific. "So it's not a healthy situation. And some folks in Canada seem to think that the only way to grow is through M&A. And I can tell you, that's not the way you grow value for shareholders."
Bristow, who was not available for an interview, did say Barrick was open to mergers and acquisitions that met "strict investment criteria," while stressing exploration as key.
Canada in the crosshairs
Although Barrick only targeted $8 million for Canada, Bristow has flagged plans during recent earnings calls to expand the Toronto-based company's Canadian footprint.
"We've established a strong new business team there, which has been evaluating multiple M&A and earn-in exploration opportunities to expand our portfolio," Bristow said during an Aug. 8 earnings call, noting it was "a highly prospective region."
Barrick's spending plans in 2022 were heavily weighted to the U.S., at $125 million, and Africa, with an $82 million budget. This comes as no surprise, as the gold miner's assets in the U.S. include the Nevada Gold Mines LLC joint venture, a flagship operation. African assets include large gold operations such as Loulo in Mali and Kibali gold in the Democratic Republic of Congo.
Barrick's Latin America exploration budget was the next highest at $62 million.
If Barrick does not initiate any major Canadian acquisitions, it might find more opportunities in cash-starved exploration companies with earlier-stage projects, Commodity Insight's Murphy said. Should gold price weakness extend into 2023, exploration companies might prove more willing to do deals at more favorable terms than in the recent past when gold prices were stronger.
"Going into 2023, one of the best opportunities Barrick has is ... to be the financier of these juniors and have a foot in the door on anything they find," Murphy said.
S&P Global Market Intelligence sometimes estimates all or part of a company's budget breakdown when the company is unable or unwilling to provide it. These estimates are based on conversations with company representatives, published sources and information gathered from joint venture partners.
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