TORONTO (Reuters) - Barrick Gold Corp (ABX.N) (ABX.TO), the world’s largest gold miner, has ousted Aaron Regent as chief executive, saying it was frustrated that its stock has languished since he took the helm three years ago while bullion prices have surged.
The company said on Wednesday that Chief Financial Officer Jamie Sokalsky, a nine-year veteran of the company, will replace Regent, whose tenure was marred by what some analysts consider to be strategic mistakes.
But investors were not immediately impressed by the surprise shuffle, and Barrick shares had turned negative by midday after rising 2 percent at market open.
The stock has risen just 3.9 percent since the market close on January 15, 2009, the day before Regent became chief executive at the age of 43. By comparison, the S&P/TSX Global Gold Index, which includes Barrick, has risen 18.8 percent in the same period.
Barrick was hit particularly hard in the aftermath of its C$7.3 billion ($7.02 billion) takeover of Equinox Minerals last year. The deal boosted the company’s exposure to the cyclical copper market without adding gold assets. Some shareholders saw that as a misstep.
“It could be that they’re looking for a fall guy after the disastrous Equinox acquisition, which we believe they overpaid for by about 50 percent,” said George Topping, a mining analyst at Stifel Nicolaus, an investment banking and brokerage firm in Toronto.
The Lumwana copper mine in Zambia, acquired as part of the Equinox takeover, has struggled with high costs and operational hiccups.
Topping speculated that the company could have more bad news to come.
“You’ve got to ask yourself, why now?,” he said. “Does it mean perhaps that there’s more problems, particularly with the Equinox assets, that are still to come?”
Analysts and investors have said the stock’s lackluster performance may also reflect what they consider to be a less-than-generous dividend. Gold miners, reaping record profits on the high price of gold, are facing mounting pressure to give more cash back to shareholders.
Barrick pays a quarterly dividend of 20 cents a share. Newmont Mining Corp (NEM.N), by comparison, pays a quarterly dividend of 35 cents a share, and its shares have risen more than 25 percent since the beginning of 2009.
In the same period, gold prices have climbed more than 85 percent, hitting a high of more than $1,920 an ounce last year as uncertainties over the global economy pushed investors into bullion.
Canaccord Genuity analyst Steven Butler said Regent’s decision to spin out the company’s African resources into a separate company, African Barrick Gold ABGL.L, has failed to ignite the gold miner’s share price.
“Management has also been too vague and unclear on how it will attain its stated medium-term production goal of 9 million ounces a year,” said Butler in a note to clients.
Barrick plans to produce 7.3 million to 7.8 million ounces of gold this year, plus some 550 million pounds of copper.
The company is building the Pueblo Viejo gold mine in the Dominican Republic and the massive Pascua Lama gold-silver project on the border between Chile and Argentina. Production from the new mines is due in 2012 and 2013 respectively.
Toronto-based Barrick, which declined interview requests from Reuters, said in a statement that Sokalsky would replace Regent as president and CEO and on the Barrick board of directors, effective immediately.
“We are fully committed to maximizing shareholder value, but have been disappointed with our share price performance. Our board has every confidence in Jamie’s experience and commitment to take our company forward,” founder Peter Munk said in the statement.
Sokalsky joined Barrick as treasurer in 1993 and became CFO in 1999. He previously worked at grocery holding company George Weston Ltd for 10 years.
Barrick named an existing director, John Thornton, as co-chairman of the board, a role he will share with Munk.
African Barrick said its parent would nominate a replacement to its board after Regent’s departure. Regent was non-executive chairman of the 74 percent-owned Africa-focused subsidiary.
John Hughes, a senior mining analyst with Desjardins Securities in Toronto, said the CEO shuffle could play out well among traditional Barrick investors, who are looking for a pure play gold company, not a diversified miner.
The departure of Regent could be seen as a strategic shift in focus back to the yellow metal, he said, adding that while gold prices rose sharply last year, most gold miners lost value.
“They cited share price, but do you know how many CEOs would be out the door for the same reason, in the event that was the only concern that the board may have had?,” said Hughes. “We would have dozens of companies that would be looking for new CEOs.”
Barrick shares slid 1.5 percent to C$43.04 on the Toronto Stock Exchange on Wednesday at midday.
Additional reporting by Clara Ferreira-Marques in London and Jon Cook in Toronto; Editing by Janet Guttsman