WHO’S WHO » GOLD
The global HQ for listed gold companies: Kinross, Agnico, Yamana and Kirkland Lake mined over 6m ounces last year worth C$12bn ($9bn)
Up 657 per cent since CEO Tony Makuch joined 3 years ago, shares in Kirkland Lake are now rivalling Agnico’s C$14bn market cap
Measured, conservative. Straight-shooter Sean Boyd has built gold miner Agnico Eagle into a market darling by stepping over the tripwires that have caught so many rivals. The son of a policeman, Boyd began his career as a paper boy for The Globe & Mail. After studying commerce in Toronto he joined accountancy Clarkson Gordon, auditing Agnico, then a cobalt miner in Quebec led by penny stock salesman Paul Penna. It was soon Boyd's biggest file.
“He didn't look like the CEO, he could have been the janitor,” Boyd tells The Northern Miner. “I made the mistake of saying I like lemon meringue pie; the next day he was in with 10 pies.” Boyd joined as comptroller, rising to finance director. The company had revenue of $50m when he became CEO. “We were making no money, we actually had no money.” Two decades later, it generates $50m a week.
Boyd has pushed into the Arctic Circle, engineering high-grade mines at minus 50 degrees, building a competitive advantage in northern Canada and Finland. “The future's in Nunavik,” he tells BNN. Cool-headed, he has avoided the distractions of hedging, mega-deals and debt. “We don't get caught up in the idea that it is a race to be the biggest. If you’ve got 30 or 40 mines spread out across the world, I don’t know how you manage that.”
Agnico Eagle’s rolling pipeline of new mines has a downside: margins are high and output is rising, but free cash flow always seems to be “on the visible horizon”, to quote one bank in Canada. “We allocate capital consistently over time,” says Boyd. “That's how you keep good people.”
Other CEOs say he is fair and co-operative, more likely to settle a lawsuit over lunch than through lawyers. After more than 20 years, is Boyd, now 59, planning to retire? “If you're a head-hunter, don't call us. We've got a lineup of people coming into each box.” Passionate about cycling; routinely does 50km bike rides from his house outside Toronto.
Agnico Eagle has no shortage of in-house talent, but first in line to one day replace CEO Sean Boyd is president Ammar Al-Joundi. With an MBA from Ivey in Ontario and having done 8-years at Citi, no one keeps a sharper eye on the group's diesel bill. Al-Joundi also did an 11-year stint at Barrick under founder Peter Munk, as finance chief of its South American business. Now 55, heading-up Agnico's team in meetings with banks, he is aiming for output of 2m ounces in 2020, up 23 per cent on 2018, and plans to keep to its policy of conservative deal flow. Most money is made with the drill bit, Al-Joundi says.
Yamana Gold's steely-eyed chairman Peter Marrone trained as a litigator. He worked on one case, representing a woman charged with stealing fridge magnets, and decided to retrain, joining brokerage Canaccord in M&A. Since then he has pocketed some of the largest pay cheques corporate Canada has ever seen. Intense, tenacious, hitting staff with emails from 4am, Marrone admits he is not the easiest person to work for, but rose to head of investment banking, advising Frank Giustra and Ian Telfer, two of the biggest string-pullers in Canada’s gold scene. After a trip to Brazil in 2003, he rolled-up his own company, Yamana, using aggressive deals, often with private parties,
to build a $4bn market cap in four years.
Weighed down by debt, shares are down 88 per cent from their peak. Having grown up outside Naples, before his family moved to Toronto in the 1960s, Marrone has joked that his relatives will one day take over the group. Former Agnico Eagle insider Daniel Racine is another contender. Racine joined in 2014 and is now CEO, selling Yamana’s Chapada copper mine for $800m to meet debt repayments. “This now is a complete cleanup,” Marrone told The Financial Post.
Yamana’s largest remaining asset is Malartic in Quebec, Canada's largest gold mine, co-owned by Agnico. Further deals are on the table.
At Paracatu, one of Brazil’s largest gold mines, explosions go off every 9 minutes. Tripling output, Canada's Kinross Gold has spent $2bn expanding the operation. Its most recent acquisition: two massive dams for $257m, pumping electricity into the site until 2037, cutting $80 per ounce off costs. Behind the deal was Andrea Freeborough, a key figure inside the group’s Toronto head office behind CEO Paul Rollinson.
Previously at KPMG in London and New Jersey, Freeborough joined as head of new investment and is now CFO. From Russia to Mauritania, any numbers going through the company go via Freeborough first.
One man you won't find in Kirkland Lake Gold's Toronto headquarters is CEO Tony Makuch. Hands-on, quiet, he would rather torque down its fleet of all-electric trucks in Canada’s Timmins district than talk-up the stock to investors (his assistant tells them he doesn't like long haul flights). Just as Melbourne was built with money from a gold rush in Victoria, Makuch says, mines keep the capital markets turning, not the other way round. “Timmins paid for building all the high-rises on Bay Street.”
Investors flock to profit, which Makuch knows how to generate, continually upping capacity, drilling-out high-grade orebodies deep underground in gold camps in Canada and Australia, thought to have been mined-out; investors don't have to “go to the jungles of central America or climb some mountain in Peru.”
When Canada’s Macassa mine sold for $5m in 2002, people thought the buyer had paid too much. Almost 20 years later, and Makuch (now known as “Tony Macassa”), has it producing 200,000 ounces per annum, which he says will soon double.
Makuch grew up in Timmins, where his father, originally from Poland, worked underground: “There's only two things you should really count on and that's gold and land.” With a masters in engineering and an MBA, the young Makuch was soon managing mines, working for Kinross and Terry MacGibbon, before building Lake Shore Gold, sold for C$700m in 2016.
He jumped to Kirkland, up 657 per cent in three years since he joined. “It motivates us to stay humble,” Makuch says. “The markets can change, things can change really quickly, so we have to keep bringing things forward.” Itself the product of mergers led by chairman Eric Sprott, with $470m of cash on its books, Kirkland is a likely consolidator of assets, especially if Newmont offloads mines in Canada.
“We all sit here today and we prosper and do well,” Makuch recently told a lunch at the Melbourne Mining Club, “but really we prosper from the hard work of others,
Cuban cigars, an Aston Martin; old-timer Terry MacGibbon has earned his place in the industry. After 30 years at Canadian nickel group Inco, he jumped to FNX Mining in 2002, which bought-up idled asset in Inco's portfolio. $10,000 invested in the stock was soon worth $1m and the company was sold for almost $3bn. His new vehicle, TMAC Resources, has bought Newmont's Hope Bay project in Nunavut. Juggling debt repayments, backers believe the company is opening a new gold district. “If you see someone huffing and puffing,” MacGibbon once told The Globe & Mail, “they're doing something wrong.”
No CEO has cut it in the Canadian market until they have sold a company to Alamos Gold. Richmont, AuRico, Esperanza; with a $3bn market cap, founder John McCluskey has positioned the company to pick-off promising rivals, from Mexico to Turkey, tripling Alamos’ production in ten years (and almost quadrupling the share count). Happy to go hostile, it is illogical to have 80 firms mining under 200,000 ounces each, McClusky argues. “As a CEO today, I truly hope someone in the mail room of my company ends up running their own one day,” he told an E&Y dinner after Alamos earned its billionth dollar of revenue.
Business pin-up Rob McEwen taught the market one thing, says broker Michael White. “He showed that you could just make a bucketload of money.”
Born in Toronto, McEwen began as a gold fund manager, rolling-up operating mines in the 1990s, building his company Goldcorp into one of Canada's largest. Squeezing its Red Lake mine in Ontario, engineers would step into his office to urge the CEO to blend-in lower-grade ore. “Can you find more high grade ore?” McEwen snapped back. “Then mine that.”
After 18 years of non-stop growth, Goldcorp was briefly the most valuable gold stock on the planet, but McEwen stepped down after merging with a company led by Ian Telfer. “Philosophically, I like organic growth,” he later explained. “I like low-cost and I like no debt, but it's not the only way to grow a business.” Trading in an C$8bn ($6bn) market cap, he launched McEwen Mining, holding 22 per cent of its stock. It was akin to a movie star taking on a B-side role, bankers recall.
A decade later, McEwen has returned to Red Lake, buying-up shares in Great Bear, a Toronto-listed explorer hitting bonanza grades in the district. Flamboyant, McEwen is never shy of predicting wildly higher gold prices. “It was in Montreal and we were in a hotel called the Queen Elizabeth and we were in the middle of a hostile bid,” one of his underlings remembers. Rob turned to the room and said, “If you're going to make it big in this industry, you have to make a discovery.” Drives a Tesla. Owns a 3D-printed model of his own brain.