G-khan
04-08-2003, 07:40 AM
Diane Francis
Financial Post
Saturday, April 05, 2003
Rob McEwen, who runs the world's richest gold mine, started charting stocks at 10 years of age. At 12, he made his first investment and it was a disaster.
"The stock I bought went up by nine times in just 18 months. This was bad because it took me a long time to figure out that doesn't happen all the time," he said.
Rob is president and chairman of Goldcorp Inc. in Toronto. But unlike most mining executives, who are usually geologists or engineers, he's not a mine finder. He's a trained money manager who has spent his career hunting for good balance sheets. And his market savvy and aptitude to effectively communicate to shareholders has helped him hit the motherlode.
Goldcorp began in the 1980s as a closed-end mutual fund. In the 1990s, it began snapping up control in several mining companies. These were merged and by 1993, the company was no longer a holding company, but an operating one producing 53,000 ounces of gold a year and with a total market value of $60-million. A decade later, Goldcorp is the world's eighth most valuable gold outfit, with a market capitalization of US$2-billion and annual production of 600,000 ounces.
"We have the strongest balance sheet in the industry. We have no debt and more net cash than the five largest gold companies combined," he said.
Rob is a gold bug who believes the precious metal will "test" US$800 an ounce from its close yesterday of US$325.30 an ounce within five to seven years.
This isn't because of the war in Iraq, but because of the world's ongoing currency and economic woes.
Underscoring this belief is Goldcorp's decision to bet on the metal's value by keeping 10% of his production as an investment.
"We are sitting on 200,000 ounces of gold, which is equivalent to 40% of the gold bullion held by the Bank of Canada," he said. "My goal is to hold more gold than the Bank of Canada. We already have more gold than 44 nations with central banks that hold gold."
Goldcorp's gold inventory, worth US$67-million, combined with its US$328-million in cash makes it a prime takeover target -- a fact that doesn't worry this savvy money manager.
"That's the way the market works," he said. "We keep doing things. We are not waiting for the takeover bus. We keep playing the game."
And winning big. Last year, Rob received the prestigious Developer of the Year Award from the Prospectors and Developers Association of Canada. Not bad for a guy who studied economics, then joined his father to run mutual funds.
The two morphed their enterprises from mutual funds to merchant banking and, in 1991, he was approached to become a white-knight bidder for the Northern Ontario mine that's now the underpinning of Goldcorp's success.
"The Red Lake mine was a terminal case and not expected to survive," he said.
But the price was right. He took over the company's flagging mining operations which had yielded three million ounces of gold over decades. He also had to cope with cranky minority shareholders and the powerful steelworkers union. He broke the union after a three-year strike.
The upside was the fact that Red Lake's "sister" mine was the successful Campbell mine that had produced 10 million ounces and was still going strong. Chances are Red Lake had much more gold to mine.
"We had 1,400 feet unexplored next door to a giant mine, so in 1995 we set aside $10-million for an exploration budget and in 1996 after nine holes we discovered ore grades 30 times higher than our existing ore grade," he said.
During this process, he ran a parallel worldwide geological contest, downloading data about the mine and past drilling results on to the Internet in order to tap the brains of finders around the world. Some $575,000 in prizes were offered and two Australian geoscience firms won. Their chosen drill sites were mostly the same as Goldcorp's team had selected.
"I came up with the idea of a contest after learning about the Linux [open source code for software development]. I realized that was my template to tap the intellectual capital of the world in trying to determine where to drill. The winners gave us more confidence in our targets," he said.
"We broke the mould for the geologists who don't like to share data and found gold at the bottom of the mine that had been there for 50 years," he said. "We monetized what was in our filing cabinets. Now the area is the most active exploration in the world. It's been fun seeing it morph."
The richness of the discovery has made the company one of the lowest-cost producers with finding costs of US$11 an ounce and production costs of US$65 -- providing huge profits at gold's current price.
The discovery led Rob to start using his money manager smarts by promoting the company. He realized that Americans paid higher multiples for everything, so he aimed to list south of the border but first had to clean up the company by eliminating its special voting shares. He swapped his 44% of the special voting shares for 6.5% of Goldcorp's non-voting stock, then promoted the company vigorously to retail, not institutional, investors.
"The U.S. market turbo-charged our currency," he said. "We listed on the New York Stock Exchange in 1995 and 5% of the value of trades occurred there and the rest on the Toronto Stock Exchange. Today, it's 58% of the volume in New York."
Cash rich and cocksure, Goldcorp is pursuing joint ventures and acquisitions in North America or Australia to meet its goal of producing one million ounces of gold a year by 2005.
And there's little doubt that Rob will get there. That is, unless the takeover bus arrives first.
http://www.nationalpost.com/financialpost/story.html?id=25845269-FE65-4581-88B0-1146D4AEDE6C
Financial Post
Saturday, April 05, 2003
Rob McEwen, who runs the world's richest gold mine, started charting stocks at 10 years of age. At 12, he made his first investment and it was a disaster.
"The stock I bought went up by nine times in just 18 months. This was bad because it took me a long time to figure out that doesn't happen all the time," he said.
Rob is president and chairman of Goldcorp Inc. in Toronto. But unlike most mining executives, who are usually geologists or engineers, he's not a mine finder. He's a trained money manager who has spent his career hunting for good balance sheets. And his market savvy and aptitude to effectively communicate to shareholders has helped him hit the motherlode.
Goldcorp began in the 1980s as a closed-end mutual fund. In the 1990s, it began snapping up control in several mining companies. These were merged and by 1993, the company was no longer a holding company, but an operating one producing 53,000 ounces of gold a year and with a total market value of $60-million. A decade later, Goldcorp is the world's eighth most valuable gold outfit, with a market capitalization of US$2-billion and annual production of 600,000 ounces.
"We have the strongest balance sheet in the industry. We have no debt and more net cash than the five largest gold companies combined," he said.
Rob is a gold bug who believes the precious metal will "test" US$800 an ounce from its close yesterday of US$325.30 an ounce within five to seven years.
This isn't because of the war in Iraq, but because of the world's ongoing currency and economic woes.
Underscoring this belief is Goldcorp's decision to bet on the metal's value by keeping 10% of his production as an investment.
"We are sitting on 200,000 ounces of gold, which is equivalent to 40% of the gold bullion held by the Bank of Canada," he said. "My goal is to hold more gold than the Bank of Canada. We already have more gold than 44 nations with central banks that hold gold."
Goldcorp's gold inventory, worth US$67-million, combined with its US$328-million in cash makes it a prime takeover target -- a fact that doesn't worry this savvy money manager.
"That's the way the market works," he said. "We keep doing things. We are not waiting for the takeover bus. We keep playing the game."
And winning big. Last year, Rob received the prestigious Developer of the Year Award from the Prospectors and Developers Association of Canada. Not bad for a guy who studied economics, then joined his father to run mutual funds.
The two morphed their enterprises from mutual funds to merchant banking and, in 1991, he was approached to become a white-knight bidder for the Northern Ontario mine that's now the underpinning of Goldcorp's success.
"The Red Lake mine was a terminal case and not expected to survive," he said.
But the price was right. He took over the company's flagging mining operations which had yielded three million ounces of gold over decades. He also had to cope with cranky minority shareholders and the powerful steelworkers union. He broke the union after a three-year strike.
The upside was the fact that Red Lake's "sister" mine was the successful Campbell mine that had produced 10 million ounces and was still going strong. Chances are Red Lake had much more gold to mine.
"We had 1,400 feet unexplored next door to a giant mine, so in 1995 we set aside $10-million for an exploration budget and in 1996 after nine holes we discovered ore grades 30 times higher than our existing ore grade," he said.
During this process, he ran a parallel worldwide geological contest, downloading data about the mine and past drilling results on to the Internet in order to tap the brains of finders around the world. Some $575,000 in prizes were offered and two Australian geoscience firms won. Their chosen drill sites were mostly the same as Goldcorp's team had selected.
"I came up with the idea of a contest after learning about the Linux [open source code for software development]. I realized that was my template to tap the intellectual capital of the world in trying to determine where to drill. The winners gave us more confidence in our targets," he said.
"We broke the mould for the geologists who don't like to share data and found gold at the bottom of the mine that had been there for 50 years," he said. "We monetized what was in our filing cabinets. Now the area is the most active exploration in the world. It's been fun seeing it morph."
The richness of the discovery has made the company one of the lowest-cost producers with finding costs of US$11 an ounce and production costs of US$65 -- providing huge profits at gold's current price.
The discovery led Rob to start using his money manager smarts by promoting the company. He realized that Americans paid higher multiples for everything, so he aimed to list south of the border but first had to clean up the company by eliminating its special voting shares. He swapped his 44% of the special voting shares for 6.5% of Goldcorp's non-voting stock, then promoted the company vigorously to retail, not institutional, investors.
"The U.S. market turbo-charged our currency," he said. "We listed on the New York Stock Exchange in 1995 and 5% of the value of trades occurred there and the rest on the Toronto Stock Exchange. Today, it's 58% of the volume in New York."
Cash rich and cocksure, Goldcorp is pursuing joint ventures and acquisitions in North America or Australia to meet its goal of producing one million ounces of gold a year by 2005.
And there's little doubt that Rob will get there. That is, unless the takeover bus arrives first.
http://www.nationalpost.com/financialpost/story.html?id=25845269-FE65-4581-88B0-1146D4AEDE6C