Compensation Discussion & Analysis Highlights

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

Why should shareholders approve our Say on Pay?

94.5% of shareholders supported our approach to executive compensation at the 2018 Meeting

  • Our compensation and governance practices were developed in consultation with our fellow owners and reflect several years of progressive and shareholder-friendly changes
  • Our incentive compensation programs are 100% performance-based and aligned with our business strategy, designed to reward a consistent track record of execution and exceptional individual performance
  • Our Executive Chairman was recognized for delivering on all of the strategic priorities we set out for him in our 2018 information circular, leading Barrick’s progress with strengthening its project pipeline and portfolio in 2018 and over the past three years, and his critical involvement with driving Barrick’s transformational, nil-premium merger with Randgold that establishes Barrick as an industry-leading gold company with superior operating metrics and investment optionality for long-term growth
  • Our compensation decisions for our Named Partners reflect a solid year of execution against our 2018 priorities, collectively and individually
  • We are not merely aligned with owners; we are a Company of Owners – we share responsibility for the Company’s success and failure and are therefore discouraged from taking excessive risks that may compromise the sustainability of our business

 

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.

 

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

  • All Barrick Shares earned through compensation by our Partners must be held for as long as an individual works at Barrick. The value of these shares is less than their face value because of the long-term, illiquid nature of the investment, which is not reflected in the compensation tables. Our shareholding requirements far exceed those of our peers and the broader market.
  • A majority of the Executive Chairman’s 2018 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.
  • 100% of LTI for our Named Partners is delivered in the form of Performance Granted Share Units (PGSUs). Upon vesting, the after-tax proceeds are used to purchase Barrick Shares on the open market (Restricted Shares) that cannot be sold until the Named Partner retires or leaves the Company (and up to two years longer if the Named Partner leaves to join, or provides services to, a group of specified competitors).
  • We do not award deferred cash incentives.
  • We launched the Barrick Global Share Plan in 2016 to make all Barrick people owners.
  • We launched the Barrick Share Purchase Plan in 2018 to provide a simple and accessible way for those who work at Barrick to purchase Barrick Shares.

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

  • Following the announcement of the Merger, our Executive Chairman purchased 2,271,029 additional Barrick Shares through open market purchases, nearly doubling his personal shareholdings in the Company to 5,000,000 Barrick Shares as at December 31, 2018. He also used 51% of his 2018 LTI award to purchase additional Barrick Shares.
  • Collectively, our Executive Chairman and Named Partners own over 5.4 million Barrick Shares worth more than $75 million as at March 28, 2019, further reinforcing our ownership culture across the organization.

Our incentive compensation programs motivate our Executive Chairman and Named Partners 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 Executive Chairman and Named Partners is performance-based. Our incentive programs are designed to reward consistent high-level execution, operational excellence, disciplined capital allocation, continual self-improvement, and to build and maintain 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 Executive Chairman and Named Partners 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, analyst and shareholder expectations, the competitive environment, and Barrick’s strategy.

Eligibility Incentive Program Performance Basis Year-End Assessment
Executive Chairman Executive Chairman LTI
Performance and Compensation Framework:

The strategic and financial goals in the framework are aligned with the priorities we have identified as critical to the continued transformation of our business. At the request of the Board, the framework may also include other strategic matters that are critical to the Company’s growth and value creation over the long-term. See “2018 Compensation of the Executive Chairman for details on this framework.

Strategic Goals 50%
ROCE 50%
Shareholder Experience Modifier
Based on individual contributions that meaningfully advance Barrick’s transformation into the world’s most valuable gold mining business, assessed in the context of the overall shareholder experience, including consideration for total returns generated for our fellow owners.
Named Partners API Program
Individual API Scorecards:

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

Annual Initiatives (varies by role)
Includes financial and non-financial objectives
100%
Based on individual contributions that meaningfully advance Barrick’s strategic progress.
PGSU Plan
2018 Long-Term Company Scorecard:

These long-term measures are important indicators of the health and success of our business at all points in time.

See “2019 Long-Term Company Scorecard” for more information on why we believe these long-term metrics are important to us.

Robust Dividend per Share10%

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.
  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 2018 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, please 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, please see “Other Information – Use of Non-GAAP Financial Performance Measures”.

Our compensation decisions reflect solid execution against our 2018 priorities.

In addition to our solid execution against our 2018 priorities, the completion of Barrick’s transformational merger with Randgold on January 1, 2019 created a truly industry-leading gold company with a common vision for long-term value creation. It significantly strengthened Barrick’s position across key metrics relative to the Senior Gold Peers, including: ownership of five of the world’s top ten Tier One Gold Assets and two more under development; the lowest total cash costs(1); high quality gold reserves; and extensive land positions in many of the world’s most prolific gold districts, positioning the Company for sustainable growth.

 

2018 Strategic Priorities 2018 Results

Free Cash Flow(2)

Free cash flow(2) per share focus

  • Generated annual revenues of $7.24 billion, operating cash flow of $1.77 billion, and free cash flow(2) of $365 million
  • Decentralization efforts resulted in full year corporate administration costs of $212 million, which were significantly below our original 2018 guidance of approximately $275 million

Capital Discipline

Strengthen balance sheet while delivering shareholder returns

  • Total debt was reduced by 11% in 2018, bringing Barrick’s total debt repayments to roughly $10 billion over the past five and a half years. With more than 85% of the Company’s outstanding debt due after 2032, Barrick now has one of the strongest balance sheets in the industry
  • Returned more capital to shareholders by enhancing our annualized dividend from 12 cents per share in 2017 to 16 cents per share in 2018, a 33% increase
  • S&P and Moody’s upgraded Barrick’s credit rating in the first quarter of 2018
  • Total attributable capital expenditures were $1.41 billion, at the low end of guidance
  • Announced mutual investment agreement with Shandong Gold

Project Pipeline

Maximize value of portfolio: assets and optionality

  • Advanced feasibility-level projects on schedule and within budget (Turquoise Ridge, Cortez Deep South, Goldrush)
  • Completed scoping level studies for major throughput expansion at Pueblo Viejo and initiated a prefeasibility study
  • Declared maiden resource at Fourmile discovery, and expanded high grade mineralization footprint
  • Donlin Gold project received Record of Decision and major federal permits
  • While 5.4 million ounces of reserves were depleted through mining and processing, we added 3.2 million ounces of reserves in 2018, at an average grade of 4.7 grams per tonne, significantly higher than our overall reserve grade of 1.56 grams per tonne. Reserves at our underground operations, where the majority of the Company’s future production will come from, were replaced, with additions at Turquoise Ridge, Goldstrike, Hemlo, and Porgera(3)

Operational Excellence

Evolution of operations

  • Full year gold production of 4.53 million ounces was within guidance
  • Achieved a 9% improvement in total reportable injury frequency rate (TRIFR) and reduced reportable environmental incidents by 12.5%
  • Re-evaluated capital allocation; total attributable capital expenditures for 2018 were $1.41 billion, at the low end of guidance
  • Strengthened collaboration with Shandong Gold by sharing technical expertise and best practices related to mining technology, information technology, information management, and digital innovation

Talent Development

Build partnerships and develop talent

  • Further advanced partnership culture through continued decentralization of the operating model to increase responsibility, accountability, and agility
  • Completed global talent assessment and review to identify and develop the next generation of industry leaders
  • Advanced the design and implementation of a cloud-based Human Resource Information System
  1. Lowest total cash cost is non-GAAP financial performance measure based on data from Wood Mackenzie with no standardized definition under IFRS and therefore may not be comparable to similar measures presented by other companies. For further details, please see “Other Information – Use of Non-GAAP Financial Performance Measures” and “Other Information – Third Party Data”.
  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, please see “Other Information – Use of Non-GAAP Financial Performance Measures”.
  3. For additional details on mineral reserve and mineral resource data, please see “Technical Information”.

Our 2019 Strategic Priorities

In 2019, we will implement a business plan that will focus on the following:

Asset Quality:

  • Grow and invest in a portfolio of tier one assets, tier two assets and strategic assets, with an emphasis on organic growth and on identifying, investing in and developing assets that meet Barrick’s investment criteria(1)
  • Maximize value-creation opportunities from the Barrick-Newmont Nevada Joint Venture
  • Sell non-core assets over time in a disciplined manner
  • Focus on brownfield exploration at Goldstrike, the Loulo-Gounkoto Complex, and Kibali
  • Invest in exploration across extensive land positions in many of the world’s most prolific gold districts
  • Maximize the long-term value of a strategic copper business

Operational Excellence:

  • Fully implement a flat management structure with a strong ownership culture
  • Streamline management and operations, and hold management accountable for the businesses they manage
  • Leverage innovation and technology to drive industry-leading efficiencies
  • Build trust-based partnerships with host governments, business partners, and local communities to drive shared long-term value
  • Strive for zero harm workplaces

Sustainable Profitability:

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

 

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 Named Partners
  • We stress-test incentive compensation programs, awards, and payouts
  • We maintain industry-leading minimum share ownership requirements for our Named Partners
  • 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

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 to our Partners

 


  1. Barrrick’s investment criteria are: (i) with respect to tier one assets, assets with a reserve potential greater than five million ounces of gold expected to generate an IRR of at least 15% (at a long-term gold price calculated with reference to a standard reference gold mine model using current input costs); and (ii) with respect to tier two assets, assets with a reserve potential of greater than three million ounces of gold expected to generate an IRR of at least 20% (at a long-term gold price calculated with reference to a standard reference gold mine model using current input costs). Near-term portfolio priorities include advancing projects at Goldrush, Fourmile and Turquoise Ridge and the Company’s strategic partnership with Shandong Gold in the El Indio belt.
  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, please see “Other Information – Use of Non-GAAP Financial Performance Measures”.