Barrick removes CEO on disappointing share price

AP News
Posted: Jun 06, 2012 3:39 PM
Barrick removes CEO on disappointing share price

Canada's Barrick Gold Corp., the world's largest gold producer, has ousted CEO and President Aaron Regent, citing its disappointing share price performance.

The announcement was sudden and the decision effective immediately. But questions over the company's explanation for the change were growing louder. The company has a history of strong earnings and an industry-leading position.

The trouble for Regent had ominously arisen at the company's annual meeting last month.

While applauding the CEO's efforts, outspoken founder and chairman Peter Munk foreshadowed the trouble ahead.

"If I look at fundamentals ... I must congratulate you because indeed this company is firing on all cylinders," Munk told Regent in front of an audience of shareholders and employees."

"But this is a public company," Munk added. "And the ultimate test of your job and my job and the board's job is to produce adequate returns to shareholders. And we used to be proud of that factor. Not to face up to it and not to talk about it would be the gravest mistake a board and management and people responsible for the welfare of this company could do."

On Wednesday, the company acted. It disclosed Regent is being replaced by Chief Financial Officer Jamie Sokalsky. Regent has been in those roles since 2009.

One analyst, though, suggested there must be more reasons behind the CEO losing his job.

Citi analyst Brian Yu, who has a "Buy" rating on the stock, noted that while the stock is down 7 percent so far this year it has still performed better than other major North American gold producers. Shares have lost 28 percent from their 12-month high in September. But since Regent came to the helm, the stock has gained about 17 percent.

Yu also notes that the company's decision to stop hedging gold prices came on Regent's watch and turned out to be a major factor in their growth. Hedging protects companies against huge swings in commodity prices. But the bet paid off, because gold prices have surged nearly 70 percent since 2009.

In May, Barrick reported a slightly higher first-quarter profit as a 22 percent jump in gold prices and better copper sales countered higher production costs. Revenue increased 18 percent to $3.64 billion.

Barrick sold 1.78 million ounces of gold at an average price of $1,691 per ounce in the first quarter. A year ago, gold sales totaled 1.86 million ounces at an average price of $1,389 per ounce.

Sokalsky has also replaced Regent on the company's board. Sokalsky joined Barrick in 1993 and became CFO in 1999.

If the share price performance was the reason for Regent's ouster, it didn't help. Its U.S.-traded shares fell $1.76, or 4.2 percent, to $40.29 in afternoon trading Wednesday.