Peter Munk’s buying Barrick, but …

by James Kwantes

Barrick Gold’s operations – and troubles – span the globe and shareholders have also been experiencing a world of pain, especially in the past few months. Shares are down 40% year-to-date, taking the company’s market capitalization below Goldcorp’s despite much higher gold production. (The plunging stock price has driven Barrick’s yield up to nearly 4%.)

Peter Munk: exiting at the bottom?

Barrick’s problems include a falling gold price, skyrocketing costs and environmental issues at its giant Pascua-Lama deposit on the Chile-Argentina border, and lucrative pay packages for executives including founder and chairman Peter Munk and former prime minister Brian Mulroney.

The Financial Post’s Peter Koven gives the lay of the land in this recent article. An $11.9-million signing bonus to the outgoing Munk’s hand-picked successor John Thornton was the tipping point that drove several of Canada’s largest pension funds to join the fight against exorbitant executive compensation.

With this backdrop, the outgoing Munk just purchased $2.1 million worth of shares in his gold company in a transaction filed Monday, as outlined by Canadian Insider. On May 9, he bought 100,000 shares at $21.05, three bucks above the 52-week low.

Large shareholder purchases in the public market by executives are usually a good omen. However, insider purchases by executives with large targets on their backs are a different matter. Even with the buy, Munk owns just 2,088,500 shares – about .2% of the outstanding total, according to subscriber service INK Research. It ain’t much for a guy who’s been synonymous with the company for decades. I suspect it won’t make shareholders feel better, either.

As Rick Rule put it in a recent BNN appearance, “his percentage ownership in the business has decreased while his say in the affairs of the business has not decreased proportionally.”

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