David Garofalo has a challenging road ahead, but thinks he has just the right skills and experience to handle it.
Garofalo, 50, will become chief executive of Goldcorp Inc. next April, when Chuck Jeannes retires. He is leaving his current role as CEO of HudBay Minerals Inc. to take the Goldcorp job.
“For the first time in my career, I’m inheriting a company that’s actually running very smoothly,” Garofalo quipped in an interview.
Indeed, Vancouver-based Goldcorp is in a pretty good position. Under Jeannes, it has grown to the point where it is now the world’s most valuable gold miner. However, it has been a rocky ascent. Goldcorp has faced unexpected challenges at its new mines and development projects, and recorded a US$2.3-billion writedown on the Cerro Negro mine in Argentina.
But the bigger question for investors is what lies ahead. Goldcorp expects its production to top out at 3.4 to 3.7 million ounces in 2017, and decline after that. To keep investors interested, the company is going to have to maintain a healthy production profile, and do it in a period when global gold production is forecast to decline. M&A activity will almost certainly be part of the plan.
“Mr. Garofalo’s challenge will be to lead a more mature company that has transitioned from being an upstart to one of the industry’s largest companies,” TD Securities analyst Greg Barnes said in a note. He also pointed out that Goldcorp’s rivals struggled to grow once they got this big.
Garofalo has faced significant challenges in the past. When he joined HudBay as CEO in 2010, the company had good assets, but was lacking a clear strategy. He spearheaded the acquisition of the Constancia copper project in Peru, which is now its biggest mine. Prior to joining HudBay, he was chief financial officer at Agnico Eagle Mines Ltd., which grew from a one-mine company in Quebec to a global giant during his tenure.
Garofalo said there are clear parallels between the strategies of HudBay and Goldcorp. Both companies have built nearly all the mines they operate, and both like to acquire early-stage projects and add value themselves through drilling and construction. Notably, he also pointed out that both companies have sold plenty of non-core assets that don’t fit their long-term plans.
“That discipline of managing your mining portfolio so that you stick with assets that move the needle, and sell the ones you don’t, has been common between Goldcorp and HudBay,” he said.
During meetings with Goldcorp’s board members, Garofalo said there was a “clear meeting of the minds” as both sides felt they shared a similar strategic vision. The Goldcorp directors were also impressed with how Garofalo built HudBay and Agnico, and thought he had the right skillset for the CEO job.
Jeannes, 57, spoke highly of Garofalo, calling him a “very strong leader” in an interview. Jeannes also said he hopes to remain active in the gold industry after he leaves Goldcorp.
Alan Hair, currently HudBay’s chief operating officer, will take over as CEO next month. There was already a succession plan in place for Hair to be the next CEO, so he was an easy choice for the board.
Garofalo said he is leaving HudBay at a logical time. All four of the company’s mines are now operating well, and it is still gearing up to develop the Rosemont project in Arizona.
“This is a natural pausing point for me to jump without disrupting the company’s activities in any way,” he said.
