191 (29.03.18)


gold-news-details.jpg

ROYALTIES & STREAMING

Ian Ball's Uncatchable

Is Ian Ball, CEO of Abitibi Royalties, the best chief executive in mining? His share price seems to think so. And by abolishing stock options for insiders, he is defying all corporate norms

When Ian Ball signed-up as CEO at Abitibi Royalties, a new player in the gold royalty space, he told its board that he wanted to overtake the share price of gold giant Agnico-Eagle, then trading at 37 dollars.
   He has not got there yet. But by dodging deals, settling a lawsuit, using his salary to buy stock and using Abitibi's cash to buy-back shares, Ball has shrunk the company's share count and sent its share price through the roof, rising from 50 cents when he was invited to join in 2014 to nearly ten Canadian dollars. “Obviously,” Ball says, “we're extremely happy.”
   Abitibi's C$112m ($87m) market cap may be too small for large funds to invest in, but its ejector-seat share price has lessons for the entire mining industry, more used to doubling its share count than bringing the number down.
   Ball's first move was to abolish stock options, one of the key perks usually enjoyed by boardroom insiders, allowing them to buy shares at cheaper prices than the wider market. Options are supposed to align a board's interests with those of its shareholders, giving directors a stake in the company they run. In reality, they also serve as a handout for mollycoddled insiders, regardless of performance.
   “If you're giving away 10 per cent of the company each and every year, that's an unrecognised tax on shareholders,” Ball says. Adding-in the capital cost of sustaining large mines, or the high cost of finance for smaller firms, and it is no surprise that the bulk of all gold stocks fail to keep up with the gold price. “We want to grow the share price.”
   Candid and quizzical, Ball is an avalanche of anecdotes, from when he crash-landed in a Piaggio plane (“the landing gear went through the fuselage”) to when he had lunch with two of the industry's heftiest CEOs (“You don't know me, I don't know you, but we have this lawsuit.”)
   At 35, he is also one of the youngest CEOs in mining, but has already established himself as one of the industry's free-thinkers, questioning assumptions and defying corporate norms, often with

astounding results.
   When Ball first tried to land a job in mining, he took a day off business school, went along to a shareholder meeting in Toronto and had a chat with a CEO. “I thought I had an in, and the CEO basically told me point blank, in a very polite way: No, we will not be hiring you.”
   Across the hall was the head office of Goldcorp, then growing into a market-darling under its maverick founder, Rob McEwen. Ball saw that McEwen was running the company with flare, obsessing over gold grades, whilst broadcasting his ambitions loud and clear. “Everything was different about it,” Ball says. “I thought, this must be the best place in the world to work.”
   He hounded McEwen into giving him a job, then followed his boss to his new company, McEwen Mining. When none of the senior managers wanted to run a land package in Mexico, Ball put his hand up and flew out on the next plane.
   Prospecting was being led by Moses, a 70-year old Mexican paid seven dollars a day to bag-up rock samples, battling cactuses, insects, heat and snakes. “If he made a discovery, great, he still made seven dollars a day.”
   Ball introduced a bonus scheme, entitling Moses to cash in proportion to the gold he collected. Engineers laughed, and said the idea was “really stupid”, but it was cheaper than a geophysical survey.
   Moses soon found El Gallo, an 80 million ounce silver discovery, hosting over $1bn of metal at spot prices today. The deposit is fully permitted. Moses retired after two years, having earned $330,000.
   At Abitibi Royalties, Ian Ball has had his fair share of good luck. Its flagship asset, a royalty over the Odyssey gold discovery in Canada, has benefited from upscaled drilling by its owners, Yamana Gold and Agnico. By banning options and bringing the share count down, Ball has translated that tailwind into an uncatchable share price. “Sometimes,” he says, “doing the right thing does actually benefit everybody.”

 

CONTENTS

Streaming: Where's
the Ceiling?

The royalty and streaming sector has grown from zero to over $30bn in little over a decade. But when will the growth stop?

Briefing: Peter Munk
Dies Aged 90

Plus: John Thornton's mixed track-record, First Quantum's $7.9bn tax bill in Zambia, and Rio Tinto's coal free future

Ask Julian

Fund manager Julian Treger, the driest man in London, answers business questions from readers