Barrick Gold Transformation - 2M oz North American Spin-Out Creates $40-50B Opportunity

• Olive Resource Capital reported record Q3 2025 performance with 61.8% quarterly gains and 113.5% year-to-date returns, driven by strong gold market performance and specific holdings
• The fund maintains a $7-8 million market cap while generating $5.2 million in net income for Q3, with management believing the share price doesn't reflect underlying value
• Barrick Gold announced plans to spin out North American assets (Nevada Gold Mines, Pueblo Viejo, Fourmile) in a potential transformational restructuring under new leadership
• Analysis suggests the North American spin-out would represent approximately 2 million ounces of production worth $40-50 billion, making Newmont the most logical acquirer despite accretion challenges

Derek Mcpherson (Executive Chair) and Sam Pelaez (President, CEO, and CIO) of Olive Resource Capital, discussed the fund's exceptional third-quarter performance and analysed Barrick Gold Corporation's announced plans to potentially spin out its North American assets. The discussion provides insight into both Olive's investment approach during the current commodity bull market and the strategic implications of major corporate restructuring in the gold sector.

Record Financial Performance

Olive Resource Capital released third-quarter financial results showing significant gains across multiple metrics. The fund posted net asset value per share growth of 61.8% for Q3 2025, representing what management characterised as a record quarterly performance. This performance brought year-to-date returns through the end of Q3 to 113.5%, supported primarily by the rising gold market and strong performance from specific portfolio holdings.

The quarterly results translated to approximately $5.2 million in net income for a company with a market capitalization ranging between $7-8 million depending on daily trading. Management noted this represented a meaningful addition to assets that they believe remains underappreciated in the current share price. At the time of discussion, the stock was trading around $0.07 per share, equivalent to the company's earnings per share for the first nine months of the year.

Mcpherson acknowledged that while some gains remain unrealised, the performance demonstrates the fund's ability to identify opportunities in the commodity sector. He emphasised the need for continued vigilance and discipline in finding the next compelling investment ideas to maintain momentum.

Macro Environment and Market Outlook

The discussion addressed the broader macroeconomic environment supporting commodity prices. Pelaez noted that November typically provides favourable entry points for commodity investments ahead of year-end rallies and the seasonally strong first quarter. He indicated that risk assets appeared to bottom between November 16-20, coinciding with the end of a U.S. government shutdown that released previously trapped liquidity back into the market.

Global liquidity remains a central focus for the fund's investment thesis. Pelaez referenced an interview with Tom Lee of Fundstrat, who suggested that December 1, 2025 marked the end of the Federal Reserve's quantitative tightening program. The removal of this liquidity contraction should provide additional support for asset prices going forward.

Some short-term volatility emerged from Bank of Japan guidance suggesting potential interest rate increases, which briefly affected certain risk markets. However, Pelaez contextualised this within the broader expansionary fiscal policy program of Japan's new prime minister, suggesting the overall direction of the third-largest global liquidity source remains supportive for commodities.

The fund managers see no material macro developments that would disrupt their thesis on commodity markets. ISM data showed weakness, gold prices continued rising, and rate cuts remain priced into markets, all consistent with their expectations for continued strength across the commodity complex.

Barrick Gold's Transformation

The central topic of discussion focused on Barrick Gold Corporation's announcement that it is considering spinning out its North American assets. This development follows a period of corporate change at Barrick, including the departure of CEO Mark Bristow and the appointment of an interim CEO. During third-quarter reporting, management had hinted at reviewing transformative acquisitions and strategic alternatives.

The proposed spin-out would include three primary assets: Pueblo Viejo (a joint venture with Newmont located in the Dominican Republic), Nevada Gold Mines (also a joint venture with Newmont), and the Fourmile discovery project. Mcpherson noted that Fourmile represents an expansion of Nevada Gold Mines controlled solely by Barrick, though optimal processing would likely occur at Nevada Gold Mines facilities.

The strategic rationale centers on valuation multiples. North American gold assets typically command significantly higher multiples than African assets - potentially 2-3 times higher, similar to the valuation differential between Newmont and Endeavour Mining. Separating these asset bases could theoretically unlock value if the combined entity trades at a blended multiple below what separate entities might achieve.

Transaction Analysis and Potential Buyers

The managers conducted detailed analysis of potential transaction structures and valuations. Pelaez corrected initial production estimates, noting that Barrick's attributable production from Nevada Gold Mines (61% ownership) totals approximately 1.6 million ounces, plus 400,000 ounces from Pueblo Viejo, creating a 2 million ounce producer before considering Fourmile's growth potential.

Given these production levels and current market multiples, the North American portfolio could represent $40-50 billion in enterprise value - potentially more than half of Barrick's total value despite representing approximately half of production. This reflects the premium valuation North American assets command.

Newmont emerges as the most logical acquirer given its existing joint venture partnerships in both Nevada Gold Mines and Pueblo Viejo. However, the analysis revealed an unexpected complication: Newmont currently trades at lower multiples than Barrick across earnings and cash flow metrics, despite producing nearly 50% more gold. Barrick trades at 13 times earnings and 16 times cash flow, while Newmont's multiples are lower despite its $98 billion enterprise value compared to Barrick's $78 billion.

This multiple compression at Newmont creates challenges for structuring an accretive deal. Any acquisition would require paying a premium above Barrick's already-premium valuation, making traditional accretion metrics difficult to achieve. The managers acknowledged that successful execution would require skilled investment banking to construct a compelling narrative around strategic benefits beyond simple financial metrics.

Potential justifications could include all-in sustaining cost reductions from adding tier-one assets, margin expansion, and the significant benefit of Newmont's S&P 500 membership. As an index constituent, any transaction would automatically attract passive capital flows and provide liquidity benefits that active managers might value when constructing portfolios. A 33-50% production increase would be transformational for Newmont and impossible to achieve through any other single transaction.

Alternative Transaction Structures

Mcpherson suggested that separating the businesses might actually serve to maximise value by creating more potential bidders. A North American-focused entity would attract companies like Agnico Eagle Mines and Kinross Gold, both of which maintain risk profiles aligned with North American operations. AngloGold Ashanti, with operations in both the U.S. and Africa, might also find strategic interest.

Similarly, the African and base metals assets might attract different buyers. First Quantum Minerals could consider Barrick's Lumwana copper asset in Zambia given geographic proximity to First Quantum's operations. Endeavour Mining or similar Africa-focused producers might find value in a separated African gold portfolio.

The managers speculated that the announcement might represent a broader strategy by Barrick Chairman John Thornton, himself an experienced investment banker, to effectively put the entire company in play. By signaling openness to dividing assets, Barrick creates optionality for various transaction structures - whether selling individual assets, regional portfolios, or the entire company to different buyers for different pieces.

However, they noted that Barrick's strong recent share price performance has complicated this strategy. After lagging through most of 2025, Barrick significantly outperformed peers over the past two months as transformation speculation built. This performance closed previous valuation gaps, making M&A economics more challenging by reducing the discount that potential acquirers might have exploited.

Summary of Key Implications

Olive Resource Capital's record performance demonstrates the fund's ability to capitalise on the current commodity bull market through disciplined security selection and macro awareness. Management's confidence in continued favourable conditions stems from sustained global liquidity expansion and supportive central bank policies across major economies.

The Barrick Gold analysis illustrates both the opportunities and complexities inherent in large-scale corporate transformations. While the strategic logic of separating premium North American assets from African operations appears sound, execution faces challenges from current valuation levels and the mechanics of structuring accretive transactions. Nevertheless, the situation creates multiple potential paths to value realization, whether through spin-outs, strategic sales to logical buyers like Newmont, or alternative transaction structures with other industry participants.

For investors, the discussion reinforces the importance of identifying inflection points in individual companies and sectors. Transformation, whether through corporate restructuring, management change, or operational improvement creates informational advantages for investors willing to conduct detailed analysis before consensus emerges. As Olive's own performance demonstrates, this approach can generate substantial returns when properly executed within favourable macro environments.

TL;DR: Executive Summary

Olive Resource Capital posted record 61.8% Q3 gains and 113.5% year-to-date returns through strategic positioning in the gold bull market. Barrick Gold's announced plan to spin out $40-50 billion in North American assets (2 million oz production) creates complex M&A dynamics, with Newmont as the logical but challenged acquirer given current valuation multiples. Management emphasises investing in corporate transformations before market recognition, while maintaining conviction in continued commodity strength driven by global liquidity expansion.

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