A Dollar for the Richest Gold Mine in US History
|Peter Munk (Barrick photo)
The richest gold mine in US history has yielded 45+ million ounces since 1987, transforming its owner from a small player to #1 in the world.
Yet a 50% stake in the same asset was valued at just a dollar a year earlier.
He’d already lived an amazing life, but Peter Munk was new to the mining sector.
At 16, Munk escaped Nazi occupied Hungary in 1944 on the Kastner train of 35 cattle wagons. After WW2, he moved to Canada and studied electrical engineering.
Claritone, Munk’s first company, went viral in 1964 building beautiful home stereos endorsed by Frank Sinatra and later TVs. As quickly as Claritone took off it went broke over a troubled factory in Nova Scotia.
Munk and partner David Gilmour dusted off and founded the largest resort in Fiji from a raw plot of oceanfront land. The venture exploded to 54 resorts in Australia and the South Pacific at its peak before fetching a $128 million sale price.
Flush from Fiji, Munk returned to Canada in 1979 with designs on the oil business. His Barrick Resources quickly burned through $100 million looking for oil, then pivoted to gold, beginning with a small Ontario mine in 1983.
“Whether you’re young or old, failure should not be an impediment to trying again,” said Munk, who was 59 before Barrick took off.
Toronto businessman Joe Rotman (1935-2015) joined Barrick’s board in its oil focused early days.
In an unrelated deal in 1979, Rotman bought an oil firm from Royal Bank which also held a 50% stake in a small gold mine in Nevada’s Carlin Trend. The mine, called Goldstrike, was valued at $1 on Rotman’s books.
Goldstrike was losing money on about 30,000 ounces of annual production with a 625,000 ounce reserve base.
Rotman tried to sell the mine but found no takers. “It was a dog,” wrote Munk biographer Don Rumball.
By 1986, Rotman’s cash strapped partner either needed to unload the mine or a Kentucky horse farm.
They chose the mine.
The best place to find a new mine is in the shadow of an old one. Yet major producer Newmont, which operated adjacent to Goldstrike, passed on the 6,900 acre project, having their own 250,000 acres nearby.
Enter engineer Bob Smith, Munk’s technical partner at Barrick, remembered as “the soul” of the company. Smith thought he could fix up Goldstrike and recommended they buy it for $62 million. Munk made the offer and Rotman and his partner agreed to the sale.
“He never, never questions my decisions concerning operations,” Smith said of his partnership with Munk. “I would never second-guess his financial decisions.”
Analysts pooh-poohed the deal on price. Soon they would eat their words.
“The real wealth in mining is generated by finding something,” @IvanhoeMines_' Robert Friedland.
Barrick's first deep drill hole at Goldstrike in 1987 delivered a big discovery and more followed. A major expansion began and production soared 50X in the coming years.
$1000 worth of Barrick shares purchased in late 1984 was worth $158,000 in late 1993 not including dividends.
Barrick became the world’s largest gold producer on the back of Goldstrike, and a generation later it is still a tier one mine.
Munk bought a 45.3 metre yacht called Golden Eagle while Barrick ramped up. He would find other successes in real estate and port building before passing away in 2018 at the age of 90.
Biographer Don Rumball wrote that Munk would work “impossibly hard to turn [visions] into reality before reality dissolved the vision… Most people do not themselves have the will or the courage to dream visions that defy gravity.”
A find like Goldstrike is as rare as Peter Munk’s determination. He never gave up and was rewarded for it.
Read Munk’s 36 Rules: https://ceo.ca/@tommy/barrick-gold-founder-peter-munks-34-golden-rules
FOLLOW me on www.twitter.com/TommyHump for more that glitters.
PS 4 Nevada explorers looking for a Goldstrike today: @andrewpollard85 @timwarman @galenmcnamara @ChadPeters_NV