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Barrick meets its shareholders

I wasn’t completely sure what to expect Wednesday morning when I walked towards the Metro Toronto Convention Centre, and the annual general meeting of Barrick Gold.

The media have been all over the beleaguered Canadian mining giant – a major target of human rights and environmental activists – over the last couple weeks. What might go down at what’s essentially a yearly coronation of directors and a rare opportunity for shareholders, investors and other members of the public to interact with company honchos?

Allegations about Barrick’s environmental and human rights record have made the news off-and-on the last few years. Gang rapes of women by security in Papua New Guinea, deaths at the hands of police in Tanzania, and most recently a Chilean court order that Barrick suspend construction on that country’s side of its prized Pascua-Lama gold project, which straddles the Argentine border, in the wake of concerns about water pollution and damage to glaciers.

But what’s really rattled the news machine lately has been tumbling share values, a downward spiral in gold prices, and fury over multi-million-dollar executive compensation.

I’m half-an-hour early, and so are a few activists who are waiting quietly across the street, but police are already swarming the convention centre entranceways. Inside, after securing my media pass, there’s nervousness about my knapsack, which contains an audio recorder, camera, notepads and pens, not to mention an inch-thick wad of Barrick papers handed to me moments earlier.

There’s a palpable tension. Security is tighter than at most corporate annual meetings, the crowd is bigger than in previous years, and yet the atmosphere seems subdued.

Board members haven’t yet appeared on-stage, but slides on a giant screen loop through Barrick’s golden years, detailing the start dates of various mines and proclaiming the company’s vision: “To become the world’s best gold company.”

From the get-go, the meeting offers up a series of awkward juxtapositions.

For instance, CEO Jamie Sokalsky declares that Barrick’s key assets are “performing very well and generating strong operating cash flow.” And then he acknowledges share prices that recently dipped to $18, less than half of what they were just a year ago and their lowest point in two decades.

“Everyone within Barrick shares your disappointment…the company is taking steps to reverse that,” Sokalsky says, describing a new “disciplined capital allocation framework” that halts immediate plans for new mines and focuses on risk adjustment and cash flow.

A $17-million payment last year to land former Goldman Sachs exec John Thornton has raised hackles with pension fund managers and other investors, and it leaves me wondering about what this kind of largesse might mean to cash flow.

However, in a passionate, 40-minute speech, Barrick chairman Peter Munk refers to the payment, which included an $11.9 million signing bonus, as necessary to land Thornton, who’s also chaired the Brookings Institution, an influential U.S. think-tank.

“John was a highly desirable, well known commodity,” Munk says, calling it an “investment into securing…the kind of access he can give us, and the credibility he can provide us with, in attracting major capital.”

Shareholder reaction seems mixed and perhaps somewhat contradictory. The board’s recommended slate is returned unanimously – no challengers emerge, so the vote is essentially a formality.

There’s no disagreement, either, on Barrick’s choice of auditor. But the pension funds and other investors obviously hold enough sway to defeat a resolution Barrick put forward regarding the way it assesses and rewards its executives.

Unfortunately for shareholders, the resolution is non-binding. Advisory, only. A close call, perhaps, given that investors can organize and have been known to vote in replacements – this happened last year with Canadian Pacific and a successful challenge issued through Pershing Square Capital, a major shareholder.

Might the Barrick vote, although symbolic, represent a warning shot? During a brief question-and-answer period, shareholders kept any angst about company financials to themselves. In fact, apart from an unsuccessful attempt to unfurl a banner on stage, the lone dissent comes from activist shareholders and their proxies.

Representing Regroupement pour la Responsabilité Sociale des Entreprises (Coalition for Corporate Social Responsibility), Philippe Bélanger says the group has repeatedly asked Barrick for greater transparency and independent information regarding Pascua-Lama’s risks related to water and indigenous rights.

“Unfortunately, RRSE members cannot say that they are totally surprised by the situation,” Bélanger says, calling on Barrick to recognize the concept of free, prior and informed consent by affected indigenous communities.

Bernardo Candelier of Izquierda Revolucionaria (Revolutionary Left) raises allegations of water supplies contaminated in the vicinity of Barrick’s Pueblo Viejo gold mine in the Dominican Republic.

With the meeting concluded, Munk, Sokalsky and other directors mingle briefly with the crowd then head elsewhere, as attendees gather in a foyer outside the auditorium and tuck into a light lunch of spring rolls, brochettes and samosas.

Most have no comment when asked for their impressions of the meeting, or their stance on issues such as executive pay.

Talmage Adams says he bought a small number of shares a week ago when the stock price reached its recent low. “I thought Mr. Munk’s speech was impressive,” Adams says, adding that he’s “concerned about the balance sheet, levels of debt, escalating costs.”

“I think I’m going to buy more shares,” one woman says, declining to give her name. “Yes, it’s time to buy more shares.”

Outside, under the watchful eye of police, several dozen people huddle under umbrellas in the pouring rain listening to updates from some of the shareholder activists. Signs are minimal, outdone by a giant Pinocchio-like puppet and a mock annual report, Debunking Barrick, issued by protestbarrick.net.

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