Enterprise Risk Management at Barrick|Enterprise Risk Management|Case Study|Case Studies

Enterprise Risk Management at Barrick

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Case Details:

Case Code : ERMT-015
Case Length : 16 Pages
Period : 2003
Pub Date : 2003
Teaching Note :Not Available
Organization : Barrick
Industry : Gold
Countries : USA

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Background Note Contd...

American Barrick discussed merging with Newmont Mining in 1991, but the talks were called off. In 1994 it purchased Lac Minerals Ltd., which included Chilean mines in South America's richest gold belt.

By 1995, when the company was renamed Barrick Gold, it had become the largest gold producer outside South Africa.

Also in 1995 the company acquired a 40% stake in the High Desert Property, now the Newmont/Barrick HD joint venture, in Nevada.

Enterprise Risk Management | Case Study in Management, Operations, Strategies, Enterprise Risk Management, Case Studies

Barrick paid $800 million in 1996 for Arequipa Resources, which owned the Pierina Mine in the Peruvian Andes. It also bought Chile's Pascua Mine and expanded its presence in Argentina.

Barrick had a stroke of luck in early 1997 following failure of talks to develop the Busang project in Indonesia with fellow Canadian firm Bre-X. The project was later discovered to be the mining industry's greatest fraud.

When gold prices plunged in 1997, Barrick announced plans to close mines in Chile and the US -- cutting about 42% of its workforce.

With gold prices still very low in 1998, milling operations were suspended at the Pinson Mine in Nevada.

Barrick also reached a joint venture agreement with Anglo American's gold subsidiary, AngloGold, to develop Barrick's potential gold properties in Congo, Mali, Niger, and Senegal. This reduced Barrick's exposure in the unstable region.

In 1999 Barrick moved into Africa with its $281 million acquisition of Sutton Resources, owner of the Bulyanhulu property. It also exchanged some land in the Carlin Trend with Newmont.

Barrick's hedging practices came under attack from investors in 2000, despite company estimates that it earned an additional $391 million through hedging in 1999 and another $300 million in 2000. A lawsuit was filed against the company that it had been actively and deliberately suppressing the price of gold.

In 2000 Barrick acquired Canadian gold exploration company Pangea Goldfields, including operations in Peru and near Bulyanhulu in Tanzania. Production began at Barrick's Bulyanhulu mine in 2001.

Barrick also acquired rival gold producer Homestake Mining in a $2.3 billion stock deal during the year. The company announced a rich strike at its Alto Chicama gold property in Peru in 2002. Barrick closed its El Indio, Bousquet, McLaughlin, Ruby Hill, and Agua de la Falda mines in 2002...

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