Ian Telfer, the Canadian mining executive who rode the gold price rally to wealth and success as CEO of Wheaton River Minerals Ltd. and lately as Chairman of
Goldcorp Inc. (
TSX: T.G,
Stock Forum), will be inducted in the Canadian Mining Hall of Fame at ceremony in Toronto this week.
Speaking to Stockhouse on the phone from his winter home in Palm Desert, California, the 68-year-old University of Ottawa \MBA Graduate shared some thoughts on Goldcorp, the mining industry in general and why he still gets excited about gold.
You are being inducted into the Canadian Mining Hall of Fame this week. What does this mean to you personally?
“As they say at the academy awards, it is always great to be recognized by your peers.’’ When the people in your own industry think that you have made a contribution to it, that’s a good feeling. I’m very honoured, thrilled and excited to have been elected to the mining hall of fame. It’s not a huge group."
How involved are you in running Goldcorp these days?
"I’m very much the Chairman. The company is run by CEO Chuck Jeannes and his executive team. In any company the size of Goldcorp, there are going to be a few decisions each year that have significant impact. When those decisions are being made, I’m part of that process. I spend 25% of my time on Goldcorp or Goldcorp related issues and events."
What do you do with the balance of your time?
"Put me down as semi-retired. I have some small directorships. I travel, read and play golf, visit my friends and family. I do what a lot of people at this stage [in life] are doing."
How much longer do you want to be Chairman?
I have no current plans to not be Chairman of Goldcorp. Peter Munk did it well into his 80s. So that certainly provides one gold post out there. I’m enjoying it. I’m engaged. It’s important to me. I care a lot about it. So at this stage I have no plans to step away from the Chairmanship of Goldcorp.
Given the current state of the gold market and the slump in junior mining in general, does the current market feel a bit like 1999/2000? Or are there differences?
It certainly has a similar feel. Prices are down. The industry is disappointed. The number of predictions of the gold price going up are extremely limited. So it does feel very very much like that.
How is this time different from 1999?
The low interest rates and slow growth in Europe and Japan are some things that we weren’t facing before. China is now growing, but not growing as quickly as before. Those are differences. On the other hand, there are more people in the world. The world GNP is higher. There are all of those new consumers in China and India. The U.S. economy seems to have picked up here. With the other economies being down that is good for other economies being able to import into the United States.
What is your view on the outlook for gold?
When I see the challenges on the production side, I think we are at or very close to peak gold.
I think that the budgets coming out of the companies in the next six months are going to be lower than people expect. Mine supply for the first time in my career is going to start trending downwards. So that is something that we have never had before. The Chinese love gold and their economy is still growing. With all the other factors out there, I’m quite bullish on it.
Do you think the collapse in the price of oil is good for gold?
Yes it is good for gold because it is good for the global economy. The price of oil going from about US$100 a barrel to $50 is like the biggest tax cut in the history of the world. So that will impact consumers. It will impact disposable income. Therefore I think it has to be seen as good for gold.
Does the yellow metal still excite you? If so why?
Yes. It is such a rare metal, you can fill up a couple of Olympic-sized swimming pools with all the gold that has been mined historically. It’s a store of value and something that we can depend on. As we watch the political and economic challenges around the world unfolding, I just think that we are in an environment where gold will be appreciated.
Goldcorp was in the headlines recently when it tried and failed to acquire Osisko Gold. How did that fit into your strategy?
No company our size can continue to explore successfully to replace reserves that are being mined. So you area always looking to acquire assets to replace what you have mined. M&A business is day to day business in the mining sector. It is not something that you cannot decide not to do. We are different from other industries in that sense. Proctor & Gamble would never have to make another acquisition in its life if they didn’t want. They could grow organically, they could spin off products, or create new brands. They could grow 100 different ways. Our business is not like that. M&A is a fact of life in our business.
What were Goldcorp’s major accomplishments in 2014?
Goldcorp brought on two multi-billion dollar mines into production. At the Eleonore mine in the James Bay region of Quebec, work crews recently completed construction and started it up. We also completed Cerro Negro mine in Argentina, achieving the first gold pour in July, 2014. To have accomplished that and got them both started up this year on time was a huge accomplishment.
What are the goals for 2015 at Goldcorp?
Like everybody we are working to keep our costs under control and find cost savings. That has worked very well this year and I expect we will continue to do more of that going forward.
Our production grew significantly in 2014 and we expect continued growth in 2015, while keeping our costs under control and our balance sheet as the least leveraged in the business. If we got all of those things done that would be terrific.
What is the investment case for Goldcorp versus its Canadian rival Barrick Gold Corp.
I don’t want to say anything negative about anybody else. I just want to say that I think there are 3 factors that investors look for. They still like growth. They like people who are in the lower half of the cost curve, and they are very concerned about debt levels. We are still growing. Our costs are still in the lower half [of the gold mining industry cost curve]. So costs are not an issue for Goldcorp. Our balance is the least leveraged in the business.
It has been widely reported that Newmont and Barrick tried, but failed to strike a merger deal in 2014. Do you see them trying to do that again in 2015?
My only comment on that is that I understand that there are significant synergies with the Nevada assets of both companies. So I’ve been surprised that they haven’t gotten together in the past. I’ve given up predicting if it will ever happen. If I was a shareholder of a company that is going around and saying that we can save a billion a year or $500 million a year when these companies are trading at 10 times earnings, that’s $5 billion. Barrick’s market cap is $15.2 billion.
If there was something that Goldcorp could do that was worth $5 billion, we would do it.
I don’t want to get into the middle. I would just say that gee, there are supposed to be savings there, and I’m surprised it hasn’t happened in the past. I can’t predict if it will happen in the future.
Barrick produces 2.5 times as much gold as us, and has 2.5 times as much cash flow as us, but their market cap is like $5 billion less than ours. It is quite astonishing, and there are very smart, wise, successful people out there that own a tonne of Barrick because they just don’t believe that this can continue.
Does Goldcorp aspire to be the world’s number one gold producer?
Not in size. If you take all the analysts who analyze our industry and look at who has the most positive recommendations, we tend to be at the top of that list or very near the top of that list. I think that’s as good a way as any of measuring how you are doing. We feel very proud of what we have accomplished. We feel very fortunate that things have worked out for us.
Our ambition is not to be number one. We always say we want to be the best gold mining company, and by a lot of measures, some people would say we are.
Were you surprised to see Lukas Lundin company Fortress Minerals stepping up to acquire the Fruta del Norte gold project in Ecuador from Kinross Gold Corp.? Can he succeed where Kinross failed?
Lukas is always early and he has been very very successful. I would never second guess anything that he does. One of the expressions I learned from my friends in Brazil when I lived there was that deals are made by people. In this quantitative world that we live in, people forget that. They tend to say these numbers make sense so I guess company x and company y will merge, or company z will buy company y. It doesn’t work like that. It depends on the people at each side of the table.
And so sometimes you just have to change the people to get a transaction. Sometimes you just have to change the company. I’m sure Lukas intends to get a deal done and his track record shows that when he puts his mind to something he gets it done. I wish him success and quite possibly he will [be successful].
You have said that your success in the mining sector came relatively late in life. What are the qualities that you believe made you successful eventually?
I think it is recognizing an opportunity, seeing an asset for sale or a company wanting to sell something or seeing someone doing a financing and recognizing that this was an opportunity and then going all in to take advantage of the opportunity.
I think sometimes people don’t recognize how rare opportunities are. They think there are going to be a lot more opportunities. Because of that, when an opportunity presents itself, they don’t act as aggressively or as quickly as they should.
Lukas Lundin is an example of someone who when he sees an opportunity, he goes all in. Just because people don’t like the Central African Republic, he doesn’t care, he sees the opportunity and he goes for it. I think that is what separates people.
I don’t have any insights into geology or which mines are going to be good or bad. But with the right people around you to help you make those decisions, [you proceed with the right amount] of intensity to try and get it done.
You are scheduled to give a speech to a group of university students this week titled “My top 10 mistakes in mining.” What is the biggest mistake on the list?
I don’t want to pre-empt my speech. But most large disappointments in our industry are related to debt. As an industry, we just have to be careful not to borrow money just because someone will lend it to us. I don’t want to talk about my friends at Barrick, but wow! 90% of their challenges are now debt related. My number one comment mistake-wise is be very careful borrowing money in a cyclical business, because if the cycle goes against you [you can find yourself in trouble]. The mining industry is just littered with companies that got into trouble because they borrowed money.
Do you have any other advice for the people in the mining sector?
I think the industry has to get ahead of the curve on environmental and social issues. When people are developing a mine, they shouldn’t be developing it based on the minimum environmental standards. They should be doing it to the best practise that exists.
I’m not saying people aren’t doing that. But we have to eliminate these environmental surprises because they damage the image of the mining industry.
Ian Telfer will be inducted into the Canadian Mining Hall of Fame along with fellow inductees Peter Bradshaw, Ron Netolitzky, and Mackenzie Watson. This year’s induction ceremony is scheduled for January 15, 2015, at the Royal York Hotel in Toronto.
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