Gold mining titan has kept his underdog edge
Deal-maker Telfer’s perspective keeps him grounded
From a corner office on the 34th floor of Park Place in downtown Vancouver, with sweeping views of the Strait of Georgia and the North Shore, the guy who squeaked into business school runs a multibillion-dollar gold mining empire.
Top dog. Underdog.
It’s a dichotomy that doesn’t faze Goldcorp chairman Ian Telfer, whose financial success arrived relatively late in life.
“You are very appreciative and you understand how circumstantial success is, and how it can happen or it can’t,” Telfer said in a recent interview. “People always say, ‘You make your own luck.’ Yeah, well, you sort of do.
“But a tailwind of gold going up every year for 10 years doesn’t hurt.”
Neither does having the right business partner. In 2001, Telfer and mining financier Frank Giustra took control of a junior company called Wheaton River Minerals with the goal of building a gold miner.
Wheaton River had $10 million in the bank. Gold was trading for less than $300 an ounce.
The following years saw a flurry of deals engineered by Telfer — including mergers with Goldcorp and Glamis Gold — that gave the expanded Goldcorp a portfolio of high-quality assets in the Americas and a recipe for growth.
Along the way, Goldcorp surpassed Barrick Gold as the most valuable gold company in the world — despite producing less than half the gold Barrick does.
The current precious metals bear market aside, it has been a lucrative ride for shareholders. Goldcorp has a market capitalization of about $21 billion. Include spinoffs and other deals put together by Telfer and Giustra — Silver Wheaton, New Gold, Tahoe Resources, Primero Mining, Terrane Metals and Uranium One (where Telfer is chairman) among them — and the total rises above $40 billion.
However, that tally has been dropping steadily along with the price of gold, which peaked at $1,900 US an ounce three years ago. It now sits at $1,215, dangerously close to the cost of production for many gold miners.
Goldcorp shares have fallen, too — from highs above $50 in 2011 to the current $26.12 — but Telfer’s not worried.
“The gold bull market’s absolutely not over. We’re playing a long game here,” he said. “I look upon gold as a currency, and all governments are devaluing their currencies.”
Rival gold producers, both larger and smaller, overpaid for gold projects during the run-up in the bullion price and have been forced to write down the value of those assets.
Goldcorp managed to weather the storm — and even grow production rapidly — through disciplined management and a focus on high-quality, in-house development projects. The company has invested billions in recent years to build a handful of mines that are coming onstream, which should boost cash flow in coming years.
The Cerro Negro mine in southern Argentina poured its first gold in July, while Eleonore in northern Quebec is scheduled to go into production later this year, adding about 600,000 ounces of gold annually.
Quebec is also home to Osisko’s low-cost Malartic mine, which Goldcorp lost out on in a bidding war earlier this year. In January, Goldcorp launched a hostile $2.6-billion takeover bid for Osisko, later hiking the offer to $3.6 billion when a rival bid emerged. Smaller producers Yamana Gold and Agnico Eagle teamed up with the Quebec and Canada pension funds to buy Osisko in April in a deal valued at $3.9 billion.
Telfer is philosophical about the failed hostile bid, noting that successful mergers and acquisitions are a balancing act between opportunity costs and asset costs. By the end of the process, he said, Malartic simply meant more to the winning bidders than it did to Goldcorp.
“Osisko had a higher value to them at this point in time than it had to us. That’s really all it is,” he said. “For
The gold bull market’s absolutely not over
IAN TELFER
them, this is a huge asset. For us, it was just going to be a good-sized asset.”
For the second quarter, Goldcorp recorded adjusted earnings of $164 million, and all-in sustaining costs of $852 US an ounce. The dividend-paying company, which produced about 2.67 million ounces of gold in 2013, has a global workforce of more than 19,000 employees.
Goldcorp is a major head-office presence in Vancouver, funding a long list of community causes ranging from education initiatives to health and the arts — a point of pride for Telfer, a former chairman of the World Gold Council.
An active philanthropist himself, Telfer said companies have a much greater ability to be philanthropic than individuals. It is one of the reasons he laments a growing trend of MBA graduates running charities rather than building businesses.
“You want the best people generating wealth,” he said, “not just distributing it.”
Uncertain career path
Before Telfer became the godfather of gold, he was the university grad who wasn’t sure what to do with his life.
After completing a bachelor of arts with a major in political science at the University of Toronto, he spent five years at a series of unfulfilling sales jobs. After flogging pharmaceuticals insurance and textbooks, Telfer decided to attend business school
There was just one problem: his marks.
“I applied to all the MBA schools and got turned down by Telfer said. “Then the day before
classes started, the University of Ottawa phoned and said, ‘Do you still want to come here?’ “I said, ‘Yeah.’ “They said, ‘Can you come in for an interview today?’ “I said, ‘Sure.’” Telfer graduated in the mid-1970s and later became a chartered accountant. His first job in mining was as a financial analyst for Hudson Bay Mining & Smelting, which was being taken over by Anglo American at the time. There he learned about strategic planning and evaluating businesses — an education that has served him well.
“Everything I learned (about the mining business), I learned there,” he said.
After experiencing some success in mining, about 20 years after graduating from business school, he got coldcalled by a University of Ottawa student fundraising for scholarships.
Telfer listened to the pitch and agreed to donate seed money to fund a scholarship.
As a result, each year the MBA student accepted into the University of Ottawa with the lowest grades receives the Ian Telfer Scholarship.
Telfer relishes telling the story, which offers a glimpse into his cheeky sense of humour as well as outsider sensibilities.
“There are so many talented, hardworking, keen kids that never get a scholarship,” he says.
And the business school that Telfer barely qualified for? It’s now the Telfer School of Management, following the gold executive’s $25-million donation in 2007.
The elevator on the 34th floor only has a down button, but the self-effacing executive in the corner suite hasn’t lost perspective.
“When they called me and took a chance on me, that was the biggest break I ever got in my life,” Telfer said. “If I couldn’t have got in, heaven knows what I’d be doing now.”
His journey through the world of mining led him to Brazil, where he lived for five years running a company called TVX Gold. His partner was a young Eike Batista, the one-time Brazilian resource billionaire who got overleveraged in recent years and lost a fortune once estimated at $30 billion.
The embattled entrepreneur remains a good friend, Telfer said.
“I said to him, ‘Eike, don’t worry. They can’t arrest you for enthusiasm,’” Telfer said. “The guy’s the best salesman in the world, and a lovely, lovely, lovely smart guy, but he got ahead of himself.”
Telfer has also recently reunited with Giustra on two junior exploration companies with projects in Mexico.
Renaissance Oil is partnering with Halliburton to assemble shale gas prospects, while Catalyst Copper is developing a copper deposit. Telfer is the largest shareholder of both companies.