TORONTO – Barrick Gold Corp will make a bigger push to attract institutional investors in China under a new deeper-ties pact with Shandong Gold, aimed at bolstering its shareholder base, executives told Reuters.
Bruised by a strong US dollar, the price of gold is nearing a one-year low, with speculators holding record short positions.
China, the world's largest producer and consumer of gold, is a largely untapped investor source for western miners, said Barrick's China president Woo Lee.
"We're establishing relationships with some of these large investors in China - that's something that we haven't had before," Lee said in an interview. "Because Shandong knows the market far better than we do, they are potentially a good source of introductions to the best investors."
Barrick hopes the addition of long-term Chinese investors will boost the demand and value of its stock which has sunk about 31% over the past year, underperforming the S&P/TSX Global Gold Index, which has dropped 6.5%, and a 3.5% drop in spot gold prices.
Shares shed 10% over the last seven sessions alone, as Barrick reported a money-losing quarter, production declines and its president's departure without a named successor.
Gold miners have largely failed to woo generalist investors by rebranding as steady, predictable performers. Instead, cannabis and electric vehicle equities have attracted investment and gold investors opted for exchange-traded funds.
Barrick and Shandong are now opening doors to their investor, financing, service and supplier networks in a second cooperation deal following last April's sale of half of Barrick's prized Argentine mine to Shandong for $960-million.
Shandong joined the head of Barrick's supply chain in his first meetings with suppliers in China, Lee said, aimed at securing cheaper materials for the Argentine mine.
Barrick chairman John Thornton believes China will dominate the gold industry, making strong connections critical. Chinese investment is one piece of a long-term strategy, but Lee said it will take time to see results.
The companies, which had considered joint investment in projects, will now assess acquisitions and asset sales.
With pressure on Barrick to grow, after years of asset sales to cut debt, the Shandong tie-up could reduce deal-making and development risk.
"People are asking where the growth is coming from and there's rumours circulating around acquisitions," said fund manager Jamie Horvat at M&G Investment, which holds 7.8-million Barrick shares, according to Reuters data.
"Barrick is trying to assuage fears that if they do some (deal) they're not going to bet the bank, and the whole company, on growth for growth's sake."