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By Nicole Mordant and Allison Martell
Dec 3 (Reuters) - Soon after he joined Barrick Gold Corp's board last year, John Thornton, the designatedsuccessor to founder and chairman Peter Munk, took a companyteam to visit Ford Motor Co and learn about theautomaker's turnaround story.
Ford, where Thornton has been a director since 1996, and itsDetroit peers were on the skids just four years ago. But now theautomaker is posting record earnings after a major overhaul ofits costs and products.
The expedition to Ford may offer a glimpse into what theformer Goldman Sachs Inc second-in-command thinks isneeded at Barrick, the world's biggest gold producer, as itfaces a host of challenges amid a diminished outlook for themining industry.
The 59-year-old American, a China hand who is expected tobecome sole chairman at Toronto-based Barrick by next spring,takes charge at a time when sentiment has soured on the miningsector after cost overruns and a sinking gold price. Observerssay he could shore up Barrick by allying it with powerfulinvestors in China.
Munk, a controversial figure who many say holds too muchsway in the Barrick boardroom, picked Thornton as hisco-chairman and successor, and the pair have worked closely formore than a year.
Barrick has underperformed many of its peers so far thisyear. Its shares are languishing near 21-year lows, hurt also bymarket dissatisfaction with the company's governance andcorporate missteps that include ballooning costs at itsPascua-Lama project in the Andes and a disappointing copper minepurchase in 2011.
"The whole industry is going through a pretty radicalrethink about their strategy," said Goldman Sachs Vice-ChairmanMichael Evans. He said China is the key strategic considerationnot just for Barrick but for the entire industry.
"I think John will use that seat as chairman to think abouttransformational change in people, strategy, culture, whatever.It's the way he thinks," said Evans, who has known Thornton for20 years and witnessed his ascent at Goldman.
Yet Thornton, who lacks a mining background, may not beevery investor's dream chairman.
There is no evidence yet that he has bolstered Barrick'sties with Chinese investors. Meanwhile, his $11.9 billionsigning bonus inspired a minor shareholder revolt. And someinvestors are disappointed that he has not acted more quickly toalign executive pay with performance at Barrick as he was freshfrom doing just that at HSBC Holdings, where he washead of the board's compensation committee.
"When Thornton joined in 2012, there was an expectationlevel that change would be effected much quicker," said OnnoRutten, a portfolio manager with Mackenzie Investments' preciousmetals and resources funds, which own about 1 million Barrickshares.
Barrick's board is mulling changes to its executivecompensation, according to a recent filing. Sources familiarwith the situation say it will soon announce a revamped board,including new independent directors.
CHINA INC
Chairman of Barrick is not a ceremonial role, and that isnot likely to change under Thornton, who is known as a hands-onboard member. Thornton joined Barrick's board 21 months ago andwas named co-chair in June 2012.
To his supporters, the father of four is a bold visionarywith unparalleled government and business connections indeep-pocketed China, one of the world's largest metal consumers,and those ties are a key reason Munk picked him for Barrick.
After boarding school in Connecticut, Thornton completedprograms in history, law and management at Harvard, Oxford andYale. He has been a director at not just Ford and Barrick butalso at Intel Corp, China Unicom and NewsCorp.
Thornton left Goldman in 2003, when he was co-chiefoperating officer, after it became clear he would likely waityears for a shot at the top job.
One of a handful of partners who built Goldman's businessesin Europe and Asia in the 1980s and 1990s, he chose anunconventional second career in 2003, teaching a leadershipseminar and serving on the advisory board of TsinghuaUniversity's business school, a top institution in Beijing.
"What few would have known or appreciated was the importanceattached to such an appointment by the Chinese government,"wrote Charles D. Ellis in his 2008 book, "The Partnership: Themaking of Goldman Sachs," noting that Thornton was the firstnon-Chinese person in such a position.
The job had Thornton commuting between his home in PalmBeach, Florida, and Beijing once or twice a month and made him ateacher and mentor to many of China's political elites.
A training ground for China's senior leaders, Tsinghuacounts President Xi Jinping, former president Hu Jintao andformer premier Zhu Rongji among its alumni. Thornton also serveson the International Advisory Council of Chinese sovereignwealth fund CIC (China Investment Corp).
Barrick recently held talks with CIC and other investorsabout potential partnership opportunities, said two sources whoasked not to be named as the talks were confidential.
Sources familiar with Barrick's discussions say thecompany's efforts go beyond merely securing a passive equityinvestment in the company. Two sources said Barrick wasinterested in a deeper, long-lasting partnership with theChinese that could include co-development and co-financing onbig projects, possibly Pascua-Lama.
FRIENDS IN HIGH PLACES
Teaching some of China's current leaders gave Thornton "thekind of trust, the kind of acceptance, the kind of relationshipsin a country where the fuel for our next phase of growth" willcome from, Munk said in April.
Dominic Barton, global managing director of managementconsultancy McKinsey & Co, went to Thornton for advice a decadeago when he moved to Shanghai as McKinsey's Asia chairman.
Barton remembers a phone call some years back from Thorntoninviting him to a workshop with a Communist Party official namedXi Jinping - now president.
A source familiar with a recent meeting Barrick arrangedduring the United Nations General Assembly said the foreignminister of China, Wang Yi, attended "because John was there."
Even so, several banking and industry sources say Thorntonfaces an uphill climb in forging deeper ties with the Chinese.They say the country is more interested in investing inindustrial metals like copper and iron ore than a precious metallike gold.
Thornton, who chairs the board of the Brookings Institution,one of Washington's most influential think tanks, hasconnections outside China as well.
Political connections are increasingly important to minersas governments around the world demand higher environmentalstandards and more taxes. In Chile, costs at Barrick'sPascua-Lama gold and silver project have risen in part becauseof requirements that the miner address environmental concerns,especially around contamination of water.
According to sources familiar with the situation, Thorntonheld talks with the presidents of Chile and Argentina to workthrough obstacles facing the project, which straddles the borderbetween the two countries.
But it is not clear how much progress he made. The massiveproject, which has long-running and complex problems and hasdrawn opposition from a nearby indigenous group, was shelved inOctober.
MUNK'S MAN?
A key question for Barrick shareholders is whether Munk, 86,will still hold sway in the Barrick boardroom after he stepsdown as chairman. Many have complained that Munk has been toodominant.
But McKinsey's Barton said the gray-haired, bespectacledThornton is his own man, and not easily cowed. Barton recalledattending a meeting with Thornton and a Chinese client someyears back. Thornton opened by asking the chairman whether hewas more loyal to his company or the Communist Party, asensitive question in China.
"When the translation happened, people sucked their breathin a bit, and I was going, 'Yup, we're out this account.' But itwas good. The guy actually smiled," said Barton.
