Barrick Resources

"Barrick Resources’ first gold mine was about to be acquired. It was the Renabie mine near Wawa, Ontario. The deal was that Barrick would merge with Sungate Resources of Vancouver, which owned a 100-percent interest in the Renabie mine. The merged corporation would be known as Barrick Resources Limited. When the merger was completed in September 1983, Cullaton Lake Gold Mines of Toronto bought, from the merged company, a 50-percent interest in the Renabie gold mine."

"Barrick Resources was started up a year or so later, to do some (unsuccessful) oil and gas exploration deals. Barrick Investments, the Khashoggis and ourselves were loaning money into Horsham Securities to invest in Barrick by way of debt. We didn’t have an economic difference in the shareholdings, but he had the voting share control and the money was going into this Canadian vehicle. What happened over the years is that, probably, 25 million dollars went from Barrick Investments through Horsham Securities into Barrick Resources."

"unk’s strategic thinking shifted into high gear. As his inves| \ / tigation and research progressed, he became convinced that even with its mountain of debt Camflo would bring new credibility to Barrick Resources. The key factor was that Camflo was producing gold in significant quantities, and had acknowledged and reputable management under Bob Smith, whereas the Renabie production was only 16,000 ounces in 1984. Munk needed gold production against which he could obtain major financing."

"With that series of transactions closed, Peter Munk and Barrick Resources were in the gold mining business with all the leverage for the raising of capital that the magical lustre of gold can excite in the minds of potential investors. Peter Munk’s aim was clear: he was not in the gold exploration business—he was in the market only for goldproducing companies already in operation and located in North America. His next move was, however, slightly out of line with that stated policy. In September, as the Renabie merger was being completed, he signed a joint venture deal in which Barrick Resources, with a 23-percent interest, and three other companies financed a stake in a potential gold mine in the farthest northern reaches of the United States, at Valdez Creek in Alaska. Valdez Creek began to produce gold in August 1984."

"In February 1985 Peter Munk had announced his strategic goal for Barrick Resources: in three years its mines would be producing 300,000 ounces of gold a year. In 1984 the production was 34,000 ounces. As 1985 closed out, Peter Munk was beginning to maximize the leverage that only ownership of the gold reserves of producing mines could bring. He borrowed (at 2-percent interest) 77,000 ounces of gold against Mercur’s reserves. He then sold that bullion on the open market for US$25 million. Those funds were used to pay off the total short-term debt to the Bank of America, leaving only $8 million in long-term debt for the Mercur acquisition."

"Just before Christmas 1987 Tony Novelly arrived at Peter Munk’s Hazelton Avenue offices to announce that Novelly’s Apex Oil Company, his holding company for Clark Oil, was in serious trouble. Apex, based in St. Louis, was one of the largest private companies in the U.S., with 1987 revenues over US$2.5 billion. It also owned, with Clark, two refineries in the Midwest with a combined capacity of 160,000 barrels per day, and 960 gas service stations. Novelly had joined Munk’s Barrick Resources board in 1984 and was a strong investor, with more than half a million American Barrick shares in his portfolio. He told Peter Munk that Apex had just defaulted on its loans and was in receivership. Novelly pleaded with Munk to have Horsham take over Apex. He asked Munk to be one of the bidders when the bankruptcy was adjudicated for the whole Apex structure. “Because the banks need my release ... otherwise I’ll sue them,” Novelly said, “If you do it my way, you will have a very strong advantage because I won’ give the release to anybody else. In return I want a participation with you.”"