Reuters just reported that it has learned that Barrick Gold (NYSE:ABX) intends to eliminate its corporate development division. This is a strange move considering that corporate development is seemingly essential. According to the Reuters article, Barrick's corporate development division is meant to find investment opportunities for the company. Given that it has done a lousy job -- a point I made last August -- maybe this isn't such a bad decision.
But now going forward, Barrick is going to have an unusual corporate governance structure. CEO Jamie Sokalsky is stepping down next month and in his place the company will have two co-presidents -- Kelvin Dushnisky and Jim Gowans. For a company that has been struggling to execute I don't find this unusual corporate governance structure to be reassuring. It would make more sense to find a corporate development team and a CEO outside the company to give the management team a fresh pair of eyes.
Given that the company is still struggling with several of the issues I have pointed out -- no growth, high production costs (despite what management says), a lot of debt, too much copper exposure vs. gold exposure -- and given this recent development I continue to stay away. The stock should do fine if the gold price rises, but the same can be said about virtually every company in the sector. Investors looking for a gold miner should look elsewhere to a company that has low production costs, growth, a cleaner balance sheet, and a familiar management structure with people who have a history of effective execution.
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