Finally, HudBay Minerals Inc. has a firm chief executive with a firm strategic plan to grow the company.
Yesterday, the Toronto-based miner named well-regarded mining executive David Garofalo, right, to the top job, ending a period of nearly six months in which it had no permanent CEO. The stock languished in that time as investors had little insight into the company's strategic direction.
The stock jumped after Mr. Garofalo's appointment was announced, closing yesterday at $12.65, up 7.9% on the day. Mr. Garofalo is currently CFO at gold miner Agnico-Eagle Mines Ltd., where he has played a key role in growing that company from a small domestic player in Quebec to an international titan since he joined in 1998.
In an interview yesterday, Mr. Garofalo said he plans to take advantage of HudBay's skilled workers and strong financial capacity to buy and build early-stage projects. It is very similar to the strategy employed by Agnico-Eagle.
"We'll very quickly look at a number of opportunities for development-stage assets that we can put into the pipeline and bring through to production," he said.
He said he is confident that the company can add projects to its pipeline in the coming months.
Over the last couple of years, HudBay has confounded investors with two key issues: a lack of stability in its CEO job, and a huge cash position that it has had trouble putting to work. HudBay currently has more than $900-million in cash, and needs to find ways to invest it in order to grow its production outside of its base in Flin Flon, Manitoba.
The turbulence at the top started in early 2008, when CEO Peter R. Jones was removed from the job and replaced by then-chairman Allen Palmiere. Later that year, Mr. Palmiere resigned after shareholders revolted over his failed plan to acquire Lundin Mining Corp. He was briefly replaced by mining veteran Colin Benner until Mr. Jones reclaimed the job in March of 2009. Mr. Jones then surprised investors by retiring at the end of that year.
The soap opera is finally over. And analysts are happy to see that it is Mr. Garofalo who has emerged as the new leader. They are confident that he can find ways to invest the excess cash to grow the company, something his predecessors had a lot of trouble with.
"While he lacks CEO experience, over the past 10 years Agnico has provided [Mr. Garofalo] exposure to base metal markets, tough production issues, and lately, rapid project growth," Thomas Weisel Partners analyst George Topping wrote in a note to clients.
Analyst David Cotterell of BMO Capital Markets also called it a good hire, noting Mr. Garofalo's experience and the fact that he is starting in a strong place at HudBay, with plenty of cash to work with and no debt.
Mr. Garofalo, for one, is not concerned about any lack of CEO experience. "Over the last 20 years, I've been personally involved in the construction of 10 mines," he said.
He takes over the job on July 12th.
pkoven@nationalpost.com