YMP TV - Catherine Raw COO of Barrick Gold

Hi Katrin, hi. Thank you for having me.

Yes, well, it obviously has had a significant impact and really changed the way we've interacted amongst each other within the company. We were lucky with the merger with Randgold; Randgold had experience with pandemics before, with the Ebola outbreak in West Africa in 2014 and more recently in the DRC. So quite early on, our CEO Mark Russo, probably at the end of January, we began to talk about the thing about pandemics being you have to act quickly. Worst-case scenario is you act quickly and it doesn't turn into anything — best case, maybe that's the best case — but it's better to act quickly than see if it's serious and then be too late. So by early February, we were drawing up company-wide emergency response plans, putting in trigger action response plans at the site, understanding how each site would differ given the different issues. Some have a greater degree of expat employees, for example. But across our operations, by mid-February, we put in precautions. We grouped this under four categories: proactive response, act quickly — that's overriding; then preparedness, so making sure we had scenario plans — what would happen if you had 25% of your employees absent, what would happen if you had to shut down, what were the things you would prioritize, how would you manage the environmental risk, safety risks. We put together scenario plans to understand what we would do and how we would mitigate those risks over time.

And then prevention, so putting in all the standard protocols of disinfectant, sanitization, social distancing, understanding how we would operate a cage to make sure you could social distance, staggering shifts, changing the way we transport people to and from our sites. All of that went in very rapidly. In Nevada, where we operate, the big issue was coaching people to and from the sites. Obviously you can't do that if you need to maintain six foot or two meter distance, so that was a big challenge to understand how we do that. Then finally, on the prevention, it was really around screening. We're using travel screens to begin with, finding out where people had been, then contact screens, finding out who people had been in contact with, and then temperature screening. In some sites we've not been able to introduce it yet, or we're just about to roll it out in North America, but across Africa, Peru, Dominican Republic, we're actually doing antibody testing and DNA testing to be able to screen for the antibodies, then tracing the people they've been in contact with, isolating to make sure anyone they've been in contact with are isolated, and then getting them through to the official DNA tests through the authorities. In that way, we have had cases of COVID, but we've been able to shut them down very quickly. We've had no inter-peer-to-peer spread within our operations, and that's been hugely important to us.

And then the final element of everything is communication. What we've seen is a lot of rumors, a lot of panic, a lot of nervousness. The lesson we've learned is just tell people what's going on. We had people coming back to work who'd been working from home last week, for example, in Ontario at our Hemlo mine. We sent them a pamphlet listing all the things they would see, making sure they understood when they should come to work, putting in one-way systems, telling them to find alternative routes if the corridor was busy. Just making them feel in control, and we've seen that's reassured a lot of our workers as well.

Yeah, well, I think I can quote Mark here, but I think you could summarize maybe by saying 'all bodies'. Effectively, by having world-class assets, it gives you a lot more flexibility in volatile environments than otherwise. So really having those world-class assets has been able to provide us that huge margin at these higher gold prices, that's really helped our business. All-body knowledge and robust and flexible assets — point one. Point two, I would say, really comes down to the lean management team. One of the things that both the previous Barrick management and now even more so under Mark is just removing the layers between the senior executive and the site. In the case of North America, it goes Mark, me, Greg who runs Nevada. What that means is it's very quick to get these messages to and from, to understand the challenges, to be agile, to work through problems, for me to speak to government representatives when need be, to get information to where it needs to go and then make decisions fast. That's allowed us to really be nimble in these last couple of months. I think obviously a higher gold price has helped the business. I think what that really does is it allows you to focus on adding value rather than protecting value. So really understanding the options we have in front of us, beginning to invest in the business and starting to see that investment come through as higher cash flows has been great.

Yeah, so as a whole, Barrick has contributed over $20 million to the COVID effort. I'll group that into sort of three buckets. The first is direct assistance for PPE, medical equipment, actually helping the states, the provinces, the countries in which we operate source the equipment they need to be able to operate and to be able to protect their health workers, their people in the short term. The second has been contributing to the vulnerable. I'll use North America as an example, given I'm CEO of North America. We focused on the homeless, the elderly, areas where low income, really donating to food banks, donating to sheltered accommodation, donating to elderly care homes, just to provide them, and importantly also First Nations. Mainly because the challenge we've got is these people can't access food in the way they would otherwise. They're trying to lock down, they're trying to stay safe, so they need assistance, and that's where we've been able to help them. The third thing is really something that's going to come in these next few months. It's been around providing stimulus. We announced the I-80 Fund in northern Nevada, which was to act as a stimulus for small businesses, to be able to get them that extra push to come out of this period and really start again, rejuvenate the local economy.

Well, it's all relative, isn't it? We've gone from 250 to 1,200, to then just 1,900, back to 1,200, and now to 1,700. So I'd say we did see a benefit of quantitative easing in the financial crisis, but I think my view is really very much gold moves in anticipation of events. We've seen this move from 1,200 to 1,700 — sorry, my dog is barking in the background — we've seen the move from 1,200 to 1,700 in anticipation of the kind of stimulus packages, the nervousness of what currencies will be worth, really the nervousness of what the global economy will look like as a result of COVID. So the question now is, what's next? If things continue to get worse, and I think in terms of really understanding how governments are going to stimulate economies to get out of what is the worst ever economic downturn seen in living history, if not in historical records — not since the Dark Ages have we seen this kind of complete stop — then I do think you'll see the gold price continue to move. Once things stabilize — they may not get better, but if the market begins to think they're not getting worse — that's the point at which I think gold comes under pressure, because then people look to reinvest back into more mainstream investment vehicles such as the equity market or fiat paper currencies.

So my mind, you've still got a bit further to go, because I still don't think people have worked out how governments are going to get us out of this. But once people start to feel that there is a path in front of us and that things aren't going to deteriorate significantly from here, then gold comes under pressure. Either way, Barrick models its long term on a 1,200 gold price, so yes, we benefit and we'll look to capture that upside through additional ounces, but when it comes to large investments, when it comes to modeling our mine lives, mining our assets, we're really focused on a long-term price of 1,200 and haven't changed that view.

Well, I think the problem with mining is that there is a lag. You can't — the gold price goes up, you're not suddenly going to see gold come back online. Yes, you've got some alluvial production perhaps out of Russia, that sort of thing, that is price sensitive and can react very quickly, but in general, the challenges we're seeing in the gold industry take five to seven years to resolve. Just as in the last cycle, when gold production began to fall from 2003 until 2008, even over that period as the gold price was rising, you didn't see gold production rise until after 2008, when the industry structurally changed the gold grade — lowering the gold grade, in fact, and destroying value for a lot of investors to be able to grow production. So you may see some of that behavior again, but a) it's going to take time, b) you need to get it permitted, and the environment for permitting, the social and environmental pressures, are much harder now for new mines, and c) you have management teams that have seen the mistakes of the past and will not degrade or devalue their assets in the same way as they have done in the past. So when you put that all together, I don't see a short-term increase in production as a result of higher gold prices. If they stay up at these levels, well, yes, over the next three, five, seven years we'll begin to see that recovery, but it does make the supply side look particularly bullish over the next couple of years and puts Barrick in a very strong position given our production profile.

I'm not sure you've got enough time. So my background: I'm a geologist originally. I studied natural sciences, specializing in geology, and went into mining finance in my master's. That was how I got into fund management. I went in as a natural resource analyst in the fund management industry, what was Merrill Lynch Investment Managers, then became BlackRock. This was sort of 2002, 2003, at the bottom of the previous commodity cycle, so there weren't many graduate jobs going in the mining industry generally. I was both lucky and, I would say, systematic in thinking, where did I see the future upside? It was probably in finance. How can I use my skills? Going into resources in the finance space was a good niche. So that was fantastic. I spent 12 years working my way up the hierarchy of the natural resources world and became a fund manager managing mining equities, gold equities, which gave me great exposure to the mining industry, to good management teams, to bad management teams. Understanding the detail, but I think more broadly, what is often lacking in the mining industry is the 10,000-foot view — being able to look at a business and understand what are the big things rather than the very small things that make the difference. Mining companies make mistakes not because they're not good at mining, it's because they make poor investments, or because they asset allocate poorly, or because they don't consider their social license. It's looking at the big picture, and I think being a fund manager has really helped me gain that perspective.

So then in 2014, 2015 — well, it was at the end of 2014 — the chairman of Barrick came to me and said, 'If you think you can do a better job than we can' — because me and my boss then, Evy Hambro, were very critical of the gold industry and the amount of value that had been destroyed in the previous rise in the gold price — he said, 'If you think you can do better, come join us.' So then I had my first baby. I was very fortunate that someone could take a risk on me even when I was pregnant. I went on maternity leave, had my first baby, came back, moved to Toronto, and within three months became CFO when the previous CFO, Sean, resigned. So that was both luck and, I suppose, skill. But that was great.

So for nearly three years, as CFO, I managed to bring down the debt of Barrick. We went from a peak of $13 billion to now being what our debt is — not even net debt, $2 billion. So we've seen a huge change in fortunes for the company, and I like to think I was part of the heavy lifting of that. Then when the Randgold merger happened, Mark came to me and said, 'You've had this experience, but what you've not got in your background is any operating experience. Do you want to give it a go?' I was a bit shocked because I didn't — obviously I was a geologist but a long time ago. I had to go away and think about it, put it that way. But I felt it was a great challenge. I like challenges. I like to not know what's in front of me. I get very bored very easily. So for me it was a great opportunity to broaden my own skill set, get to really understand the business, and actually own some of the decisions rather than, as a CFO, you don't create the numbers, you put the numbers in the right order. As a fund manager, you're just moving numbers around, you don't actually do anything. So it's been a wonderful experience this last — well, what is it, a year and a half — in which I've also had another baby, to really get to grips with it all and start to understand truly how to make a difference, whether it's environmentally by putting in solar power plants, whether it's operationally, whether it's geologically. You get a chance to really drive a company, and that is a huge amount of job satisfaction, particularly in periods of crisis like now, where you see the impact of being able to be calm, deliver, and help people. It's been very satisfying in these last couple of months.

Well, I think the first thing is never to worry that you're closing doors. I think one of the things I've always done is make whatever is the best decision at the moment. You have options in front of you, and the thing I always think is never to be too concerned about where you're going to be in three, five, ten years' time, because when I look at my career, what I had planned isn't where I've ended up. I never thought I'd be a fund manager for long, and I ended up being there for 12 years. I took a leap into Barrick and thought I might do it for three years, and I've been here for five years. The key to a good career is just to do something that you're interested in and that provides you a challenge. With regards to the mining industry, it will definitely provide you a challenge. It's also incredibly ripe for change. Any young person that wants to make a difference, there's no point going into an industry that's already making a difference because you're too late. The mining industry is behind a lot of others, so what it needs is some young blood, fresh eyes, different perspective. If you're willing to face a challenge and cope with the ups and downs of commodity prices, then you really can make a difference in mining, particularly in downturns, because the willingness to try something new is that much greater — a crisis forces change. So that's my advice, but you have to be wanting a challenge. There's no point coming into mining if you just want life to be easy. It suits a certain temperament, I think.

That's a big question. My advice for investors first of all is to understand what the floor of any commodity price is and where a company is positioned relative to that floor. Second of all, when speaking to management teams, to be able to have confidence in the way they think. One of the things I found most successful, both as a fund manager but also even now, is if you understand how a management team approaches their business, you can trust them to make good decisions, or you can trust them to make bad ones, but either way you know what the nature of the decision they're going to make is. Once you can do that, it doesn't matter what the decision is — you can invest off the back of it. So the key is being able to understand what a management team stands for, what is their ideology. If you can articulate that to yourself, then you probably have a good investment, or a predictable investment, in front of you.

No, my pleasure. And I apologize for the dog barking in the background, but then you were both working from home. Yes, absolutely. Luckily it wasn't the baby, so he's asleep.

Bye.