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Berkshire announced a new 20.9 million-share stake in Barrick Gold, worth $564 million. The investment, disclosed late Friday, gives Berkshire a 1.18% stake in Barrick and makes it the 11th largest shareholder.
“It's the ultimate privilege to have Berkshire Hathaway as an investor in one's company and something that I've been aspiring to,” Bristow told FOX Business exclusively. “We hope it’s not the end.”
News of the investment caused Barrick Gold shares to surge 12% on Monday to their highest level in more than 7 years. The stock has gained 62% this year.
Berkshire’s stake in the Toronto-based Barrick Gold comes despite both Buffett and his right-hand man Charlie Munger over the years repeatedly voicing their disdain for gold.
In 2005, Buffett complained gold was “something that gets dug out of the ground in Africa“ and has “no utility.”
Munger once famously said “civilized people don’t buy” gold.
Warren Buffett (L), CEO of Berkshire Hathaway, and vice chairman Charlie MungerSource: JOHANNES EISELE/AFP via Getty Images
While Buffett's team didn't disclose the reason for its investment, its possible the decision was made by Todd Combs or Ted Weschler, investment managers who are potential successors at Berkshire.
Inquires by FOX Business to Buffett were not returned at the time of publication.
So what exactly is Berkshire buying?
Bristow, who has not spoken to anyone at Berkshire about the investment, said the Omaha-based conglomerate is investing in a miner that has the “best people running the best assets” and that his company aims to make money in all cycles and doesn’t need to “pray for the gold price” to surge to help it turn a profit.
Barrick, in a move that displayed the strength of its business, last week hiked its dividend by 14% to 8 cents per share. The dividend increase came as more than 180 companies have cut their dividends and another 150 have suspended their payouts due to the uncertainty caused by COVID-19.
Barrick’s dividend hike surely put a smile to Buffett’s face as he has long expressed his love for stocks with reliable and sustainable payouts, something that Bristow has delivered on throughout his career.
Bristow’s previous company, gold miner Randgold Resources, grew its dividend for 13 years, having never once cut the payout. Randgold merged with Barrick in 2018, creating the world’s second-largest gold miner.
The 31% surge in gold prices this year has strengthened the foundation of Barrick’s business while reducing operating risk, increasing cash flow and bolstering its balance sheet. That has enabled Bristow to “fast track” his revised dividend policy, which will now be based on “some sort of ratio” whether it be net income or cash flow, he said.
At the end of the second quarter, the Board said it believes the dividend increase is sustainable after reporting "total liquidity of $6.7 billion, including a cash balance of $3.7 billion."
“We're very privileged to have them [Berkshire Hathaway] as an owner, and we feel the same about anybody who buys our shares,” Bristow said.