Compensation Discussion & Analysis Highlights

Check mark The Board recommends a vote FOR approval of the advisory vote on executive compensation.

Why should shareholders approve our Say on Pay?

Following the completion of the Merger in 2019, the Compensation Committee undertook an extensive review of the compensation philosophy and programs for the Executive Committee and the Executive Chairman to ensure they continue to be aligned with our strategic goals and the interests of our shareholders. The Compensation Committee considered feedback from shareholders and enhancements to further support Barrick’s journey to becoming a modern mining business. The following enhancements were implemented as a result of this rigorous process:

92.1% of shareholders supported our approach to executive compensation at the 2019 Meeting

  • We materially reduced the total compensation opportunity for the Executive Chairman and simplified the performance alignment of LTI outcomes with the overall shareholder experience
  • We updated our cornerstone PGSU Plan to accelerate share ownership through a phased vesting schedule and to provide access to awards, subject to the achievement of market-leading share ownership requirements
  • We introduced a new Global Peer Group in recognition of Barrick’s operational scale today as one of the largest gold mining companies in the world and our competition for talent
  • Our compensation decisions reflect the excellent progress achieved by our NEOs in rebuilding a new, value-focused Barrick
  • We reviewed non-executive director compensation to ensure it supports the attraction and retention of highly qualified and diverse board members and that it reflects the time commitment expected of our directors

Our ownership culture is critical to who we are and how we work at Barrick. As a Company of owners, our compensation system is designed to reward performance and drive accountability through shared ownership.

 

Ownership culture diagram

 

How we promote and support our ownership culture across the organization:

  • All Barrick Shares earned through compensation by our Partners are subject to shareholding requirements that far exceed those of our peers and the broader market.
  • 100% of LTI for our Partners, including Named Partners, is delivered in the form of PGSUs.
  • We do not award deferred cash incentives for executive compensation purposes.
  • A majority of the Executive Chairman’s 2019 LTI award was used to purchase Barrick Shares on the open market that cannot be sold until the later of (a) three years from the date of purchase and (b) the date the Executive Chairman retires or leaves the Company.
  • Within five years of joining the Board, non-executive directors are required to hold at least three times the value of their annual Board retainer in Barrick Shares and/or DSUs.

Our ownership culture is becoming stronger and deeper across the organization:

  • Collectively, our Named Partners own over 6.2 million Barrick Shares worth more than $122 million as at March 26, 2020, further reinforcing our ownership culture across the organization.

Our incentive compensation programs motivate our NEOs to think in decades, plan in years, and act with urgency to deliver results for our fellow owners.

To drive excellence in all that we do, 100% of all incentive compensation awarded to our NEOs is performance-based. Our incentive programs are designed to reward consistent high-level execution, operational excellence, disciplined capital allocation, continual self-improvement, and improved sustainability performance, with a view to building and maintaining partnerships of real depth and trust with all of our stakeholders. We prospectively disclose our short-term and long-term performance measures each year to hold our NEOs accountable for results. At the heart of our pay-for-performance system is our goal setting process. We review our business plan at the beginning of each year to define the key areas of focus and priority actions for each role. We also review the Long-Term Company Scorecard against our strategic plan to ensure the performance measures remain relevant. Long-term performance ranges are reviewed and set based on challenging levels of performance that reflect Barrick’s Life of Mine Plans, shareholder expectations, the competitive environment, and Barrick’s strategy.

Eligibility Incentive Program Performance Basis Year-End Assessment
Named Partners API Program

Individual API Scorecards:

Annual initiatives that are specifically defined for each role to reinforce individual accountability for strategy execution.

Annual Initiatives (vary by role)
Includes financial and non-financial objectives
100%
Based on individual contributions that meaningfully advance Barrick’s strategic progress.
PGSU Plan

2019 Long-Term Company Scorecard:

These long-term measures are important indicators of the health and success of our business over the long-term.

See “2019 Performance Considerations for Named Partners – 2019 Long-Term Company Scorecard (for 2019 PGSU Awards)” for more information on why we believe these long-term metrics are important to us and “2019 Compensation of our Named Partners – Performance Granted Share Units (PGSUs) – 2020 Long-Term Company Scorecard” for the metrics that we have selected for 2020, which includes an increased weighting on sustainability performance, to support the delivery of our long-term strategic plan.

Financial Measures:
Return on Invested Capital (ROIC)(1) 15%
Growth in Free Cash Flow per Share(2) 15%
Robust Dividend per Share 10%
Strong Capital Structure 10%
Capital Project Execution 10%
Non-Financial Measures:
Strategic Execution 15%
Reputation and License to Operate 15%
People Development 10%
Based on Company performance against the long-term targets that are set and disclosed prospectively at the beginning of each year.
Executive Chairman Executive Chairman LTI

Performance and Compensation Framework:

The use of relative TSR ensures LTI awards are aligned with the overall shareholder experience. For 2019 only, 25% of the Executive Chairman’s LTI award was based on an evaluation of the annual strategic initiatives that were prospectively disclosed in our 2019 Circular. The balance of the Executive Chairman’s LTI award (75%) for 2019 was tied to relative TSR. This performance framework was developed in consultation with our shareholders. See “2019 Compensation of the Executive Chairman” for details on the redesigned framework.

Based on relative TSR against the performance range that is set and disclosed prospectively, and for 2019 only, individual contributions that meaningfully support Barrick’s journey to becoming the world’s most valued gold company.
  1. ROIC is an internal performance measure used to manage performance. ROIC measures return on invested capital by taking Adjusted EBIT (Adjusted EBITDA less depreciation) less cash taxes as disclosed in the consolidated statements of cash flow and removing the impact of foreign currency translation gains/losses as disclosed in the consolidated income statements and dividing by average invested capital. Invested capital is calculated by taking consolidated assets as reported on our balance sheet net of assets not subject to depreciation as reported in Note 19 Property, Plant and Equipment of the financial statements in our 2019 Annual Report. Adjusted EBIT and Adjusted EBITDA are non-GAAP financial measures with no standardized definition under IFRS and therefore may not be comparable to similar measures presented by other companies. For further information and a detailed reconciliation of these non-GAAP measures to the most directly comparable IFRS measures, see Other Information – Use of Non-GAAP Financial Performance Measures.
  2. Free cash flow is a non-GAAP financial performance measure with no standardized definition under IFRS and therefore may not be comparable to similar measures presented by other companies. For further details regarding non-GAAP financial performance measures, see Other Information – Use of Non-GAAP Financial Performance Measures.

Our compensation decisions reflect the progress that management has made in rebuilding a new, value-focused Barrick.

2019 was another transformational year for Barrick, highlighted by our rapid and successful integration of the two businesses following the Merger, solid operational and financial performance, and the implementation of key strategic initiatives critical to engineering a business capable of achieving the vision of being the world’s most valued gold company. Our solid performance was capped by the successful completion of the Nevada Gold Mines joint venture with Newmont Corporation, the minority buyout of Acacia Mining plc, and the resolution of legacy challenges with the Government of Tanzania, including the formation of Twiga Minerals Corporation, heralding a new partnership between Barrick and the Government of Tanzania. The summary below provides an overview of what we committed to delivering a year ago as part of our 2019 strategic priorities and the highlights of what we achieved in 2019.

What we outlined a year ago as our 2019 strategic priorities What we achieved in 2019

Strategic Initiatives

Focus on Tier One Gold Assets(1) and Strategic Assets and unlocking value through the exploration potential from our
extensive land positions in prolific gold districts

  • Successfully merged Barrick with Randgold to form an integrated global gold mining company operating six of the world’s top ten Tier One Gold Assets(1)
  • Formed Nevada Gold Mines, the joint venture between Barrick (61.5%) and Newmont Corporation (38.5%), where Barrick serves as the operator. The mineral endowment across our extensive land positions in the joint venture area of interest provides a strong value foundation in one of the world’s most prolific gold districts
  • Bought out Acacia Mining plc’s minority shareholders
  • Initiated Barrick’s targeted $1.5 billion portfolio rationalization program for non-core assets. Sold our 50% interest in non-operated Kalgoorlie Consolidated Gold Mines in November 2019 and reached agreement for the disposal of a 90% interest in the Massawa project in December 2019, which collectively generated gross proceeds of approximately $1.2 billion and reinforced Barrick’s strategy of maintaining a concentrated Tier One Gold Asset(1) portfolio. The Massawa transaction closed in the first quarter of 2020
  • Mining plans at Hemlo, Pueblo Viejo, Veladero and Porgera were reviewed and refocused to extend Life of Mines significantly
  • Achieved a year-on-year increase in proven and probable reserves at higher grades, net of depletion, with reserve replenishment achieved across the majority of our Tier One Gold Assets(1)
  • Made a new high-grade discovery as well as a significant year-over-year increase in resources at Fourmile and continued to delineate further brownfields expansion potential across the portfolio including at Carlin, Kibali, Loulo-Gounkoto, Hemlo, Veladero and Porgera

Operational Excellence

Emphasis on efficiency, cost reduction, and strong cash flow generation to fund robust investment

  • Implemented a flat, operationally focused, agile management structure
  • Rationalized the corporate office in Toronto and other regional offices
  • Refocused the global business with three regions led by separate regional leadership teams
  • Achieved full-year guidance targets and gold production of 5.5 million ounces, at the upper end of the 5.1 to 5.6 million ounce guidance range and copper production of 432 million pounds, above the guidance range as set out in our 2019 guidance
  • Debt net of cash at $2.2 billion was reduced by 47% from 2018, which reinforces our strong balance sheet, liquidity and financial flexibility for any disciplined capital allocation decisions
  • Generated free cash flow(2) in excess of $1.1 billion in 2019, a significant increase from $365 million in 2018 driven by our focus on Tier One Gold Assets(1), delivery of identified synergies at Nevada Gold Mines, an emphasis on cost reduction and the empowered regional management structure
  • Successful formation and integration of Nevada Gold Mines resulted in our North American operations delivering at the midpoint of their production and cost guidance ranges as well as contributing to free cash flow(1) growth
  • Increased plant availability and mining efficiency, particularly at Lumwana, which drove significant year-over-year improvement in copper production and costs
  • 133% increase in dividend per share since the announcement of the Merger, supported by significant decrease in debt net of cash

Sustainable Profitability

Disciplined approach to growth, emphasizing long-term value for all stakeholders through increased returns, driven by a focus on return on capital, internal rate of return (IRR), and free cash flow(2)

  • Five-year business plan to be supported by a ten-year production outlook underscores our strategic objective of being sustainably profitable
  • As at December 31, 2019, our share price on the NYSE had increased by 78% since the Merger was announced. It has outperformed the broader market indices over the past five years
  • No fatalities and zero class 1 (high impact) environmental incidents recorded during the year, in line with the company target
  • Advanced our growth projects to production through evaluation, engineering, and development, including Cortez Deep South, Goldrush, Turquoise Ridge Third Shaft, the Pueblo Viejo Plant Expansion, and the Zaldivar Chloride Leach Project
  • Engaged with our host countries to recover and retain our license to operate and deliver on our commitment to responsible mining
  • Accelerated our transition to cleaner energy at Pueblo Viejo, Veladero, Nevada, Loulo-Gounkoto, and Kibali and raised the percentage of water recycling to 73%

Our 2020 Strategic Priorities

In 2020, we will implement a business plan that will focus on the following:

Strategic Initiatives:
  • Progress our objective of becoming the world’s most valued gold company
  • Optimize our portfolio and unlock our resource value and mineral inventory
  • Consider opportunities to add to our portfolio, focused on Tier One Gold Assets(1)
  • Dispose of non-core assets
Operational Excellence:
  • Execute our 2020 plans through delivery of all production and growth projects
  • Embed our DNA at all levels of the organization
  • Maintain ESG as a high priority in all our activities
  • Motivate employees to take personal responsibility for safety
  • Integrate business systems with fit for purpose processes to ensure effective decision making and execution
Sustainable Profitability:
  • Deliver a ten-year production outlook based on a long-term gold price of $1,200 per ounce
  • Deliver value for all our stakeholders through discovering, developing, and operating Tier One Gold Assets(1)
  • Become the mining partner of preference for host countries
  • Drive unit cost efficiencies throughout the business
  • Attract, retain, and develop an effective multicultural, multigenerational workforce that is agile, integrated and able to deliver on our plans across the globe
  • Maintain a sustainable dividend policy that delivers returns to shareholders
  • Refine and measure leadership effectiveness

We have a shareholder-friendly compensation system that does not encourage unnecessary and excessive risk-taking.

What we do

  • We pay for performance
  • We ensure that the long-term interests of our directors and management are one and the same
  • We balance short-term and long-term incentive compensation for our Named Partners
  • We cap incentive plan payouts for our NEOs
  • We stress-test incentive compensation programs, awards, and payouts
  • We maintain industry-leading minimum share ownership requirements for our Named Partners
  • We require all employees, including our NEOs, to certify annually their compliance with the Code of Business Conduct and Ethics
  • We maintain a robust Clawback Policy
  • We design our compensation plans to mitigate undue risk-taking
  • We mandate double-trigger Change in Control provisions for all long-term incentive awards
  • We regularly review compensation
  • We hold an annual advisory vote on executive compensation
  • We regularly and proactively engage with our shareholders and continuously use their feedback to refine our compensation practices
  • We regularly consider the implications of the risks associated with the Company’s executive compensation programs and practices including through discussion by independent directors at our three standing committees

What we do not do

  • We do not guarantee incentive compensation
  • We do not re-price equity-based incentive compensation awards
  • We do not provide tax gross ups in connection with Change in Control severance payments
  • We do not permit hedging of our Company’s equity-based long-term incentive compensation and personal share ownership
  • We do not grant deferred cash incentives for executive compensation purposes

 

  1. Barrick’s investment criteria are: (i) with respect to Tier One Gold Assets, assets with a reserve potential greater than five million ounces of gold that will generate an IRR of at least 15%; and (ii) with respect to Tier Two Gold Assets, assets with a reserve potential of greater than three million ounces of gold that will generate an IRR of at least 20% (in each case, based on our long-term gold price assumptions).
  2. Free cash flow is a non-GAAP financial measure that does not have any standardized definition under IFRS and may not be comparable to similar measures of performance presented by other companies. It should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. For further details regarding non-GAAP financial measures, see “Other Information – Use of Non-GAAP Financial Performance Measures”.