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Dear Agoracom Family,
I want to thank all of you for your patience with us over the past 48 hours and apologize for what was admittedly a botched launch of our new site.
As you can see, we have reverted back to the previous version of the site while we address multiple forum functionality flaws that inexplicably made their way into the launch.
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Message: Interesting Article :Newmont bracing to spread its wings
Newmont bracing to spread its wingsNewmont bracing to spread its wings
COLIN MCCONNELL/TORONTO STAR
During his legendary career, Newmont Mining vice-chair Pierre Lassonde has preyed on the gold bull run. He envisions the metal soon hitting $1,000 U.S.
Sluggish miner has hopes of striking gold again with Dick O'Brien and Pierre Lassonde at the helm
Nov 16, 2007 04:30 AM
Lisa Wright
business reporter
Despite the recent correction, these are buoyant times for the bullion business. Just ask two of Newmont Mining Corp.'s golden boys.
One is the Denver miner's vice-chair Pierre Lassonde, an industry legend and a Canadian gold bug who is revelling in the precious metal's second major bull market of his career. While gold hit the skids this week after a two-month rally – it fell another $27.10 (U.S.) yesterday to close at $785.90 – he believes it's just a speed bump on the way to four-digit territory.
The 60-year-old former president of Newmont and founder of the old Franco-Nevada Mining Corp. has been something of a soothsayer when it comes to gold. He says pullbacks are to be expected when prices soar, and chalks it up to recent strength in the U.S. dollar since the two tend to move in opposite directions.
Gold has retreated from a 28-year high of $845.40 hit last week. The metal struck a spot price record of $850 in January 1980.
The other golden boy is Dick O'Brien, a new kid on the bullion block who is now running Newmont after a couple of years as its chief financial officer.
In his first Canadian interview since taking over as CEO four months ago, the 53-year-old showed he is wasting no time shaking things up at the sluggish Denver gold mining giant, steering it through a major restructuring.
The coveted yellow metal is also getting much harder to find and far more expensive to extract. The rookie gold CEO is now focusing on Newmont's leverage to the gold price, eliminating its hedge book – to take advantage of any price gains – and striking a friendly cash deal to buy Canada's Miramar Mining Corp. for $1.5 billion, marking the giant's foray back north of the border after tapping out reserves at its old Timmins-area mines.
Meanwhile, Lassonde was supposed to retire a year ago but he remains in the thick of things, working on the proposed $1 billion initial public offering of the company's merchant banking arm, also called Franco-Nevada.
O'Brien said he hopes to boost Newmont's share price and replace its dwindling reserves while restoring the historic miner's place in the market as the go-to gold senior, despite falling behind Barrick Gold as the No. 1 producer.
`New day dawning at Newmont'
Dick O'Brien took over as CEO at Newmont Mining four months ago. He explains where he sees the company headed in this interview with business reporter Lisa Wright.
Q. Why the sea change?
A. There's a new day dawning at Newmont. It's more than just that I became CEO. It's more a new mind frame. The company was a bit stuck with rising costs and I think there was a bit of a pall over it both from investors and internally. So one of the things I chose to do as the new CEO was to put the past in the past and try to move forward with some momentum and change some of the things we were thinking about, such as undoing the fixed-price hedges we had and trying to remove some of the lack of focus in the business.
Q. Is North America more in focus with the Miramar acquisition?
A. With that we will have a significant exposure back in Canada again. We enjoy being in Canada, in a resource-rich environment, and we can only hope that we can continue to find more opportunities there. So for us, it's about getting back to Canada. That being said we are a gold company; we have to go where the gold is. So I would like to see us not just focus on North America but focus on opportunities throughout the world.
Q. Barrick knocked Newmont off its perch as the No. 1 gold producer after merging with Placer Dome. Is your goal to get the top spot back?
A. It's not. My focus is to be the best gold company, not the biggest. I really don't believe Barrick did it to be No. 1; I believe they did the Placer deal for value. And I think if you get entranced with being the biggest, sometimes you lose the focus of trying to really do the best you can with every asset that you have .... So, yeah, at some point, would I love to be the biggest and the best? Well, sure, at some point, but it's not my goal today. My goal is to make Newmont the best company we can make it with the assets we have.
Q. Rumours keep popping up about Barrick taking over Newmont. Is that a concern?
A. My first job is to build value for this company through our own operations .... Do I worry about someone else coming in? I'd like to have enough time here to run this ship and get the thing moving in the right direction...people are going to do what they're going to do.
Q. It's been said that the cultures are too different to make a good match.
A. Well, I don't know because I haven't been inside of Barrick. I can tell you one criticism that investors lay at the feet of the majors is you guys don't have any growth. With a combination, investors would probably say exactly the same thing. When the rumour has come up, it has generally come from Canada. And Barrick seems pretty quick to say `not interested.' We've got plenty on our own plates. It doesn't mean that it wouldn't ever be imminent or it would be impossible, but most investors would say they're pretty happy with the size that we're at and I don't think they're looking for big combinations in the gold business presently.
Q. Are you on the current bandwagon of predicting a four-digit price like every other gold CEO out there?
A. I'm confident gold prices are going to continue to run here but I'm not going to put four digits or a time frame or anything else on it. We feel good about the direction. I think gold is really seen as a store of value in some of the financially turbulent times. But we're in the market consistently, good times, bad times (and) volatile times. We are just going to keep making the metal.
Will Dow-gold ratio hit one-to-one again?
Newmont vice-chair Pierre Lassonde looks back at where the price of gold was, and how high it might rise, in this interview with business reporter Lisa Wright.
Q. What do you make of this correction of gold prices?
A. Hey, a year ago it was at $600-and-something (U.S.), so it's still pretty good. We're just getting a bit of a pullback, which is healthy. But I do believe that over the next year or two we'll break right through the $850 (barrier). At some point in the next five years you'll see gold with three zeroes after the first number, we just don't know what number that's going to be.
Q. So where is gold headed?
A. I'll bring out my crystal ball (laughs). But everything is pretty well unfolding the way that we had anticipated and gold is responding primarily to the devaluation of the U.S. dollar. That correlation is the most important in terms of the gold price. We had foreseen that we were going to chase the old highs, the $850 (range), and just almost touched it last week.
Q. What's your theory on the price?
A. Something I've been pointing out since 1999 in our Franco-Nevada annual report is the Dow Jones industrial average divided by gold price. It will blow you away. The Dow represents financial assets while gold represents hard assets. And, over a 100-year period from 1920 to today, there are cycles. There are times to own financial assets, when the ratio goes up, and then there are times to own hard assets, when the ratio goes down because it's one against the other.
So from 1920 to 1929, you wanted to be in financial assets. From 1929 to 1935 you really wanted to be in gold. This is a very interesting thing because the financial asset peak was in 1966. And then the hard asset peak was 1980, so this was a 14-year bull market in hard assets. When you think about it gold went from $35 to $850. If I told you in 1966 that gold is going to $800, you'd say `Lassonde you're completely out of your mind. You're wacko.' But oil went from $2.50 to $50 in that same time. And you know what happened to real estate prices in Toronto in the '70s.
Now here's the real kicker. At the top of the hard-asset bull market, (1933), the Dow, which had been 370 at the top, bottomed at 37, and gold peaked at (about) $35. The ratio was essentially one-to-one. In 1980, the Dow was (about) 800 and gold was $800. One-to-one. You know where the Dow is today – (just over) 13,000. Gold is $800. In every bull market in the last 100 years the ratio came down to essentially one-to-one.
Q. Is this Dow versus gold theory picking up steam?
A. When you tell portfolio managers this, it scares the heck out of them. If the Dow was to lose 90 per cent of its value and go down to 1,200 and gold is at $1,200, you have one-to-one. But then they're wiped out. They're kaput. Or is the Dow going to come down to 6,000 or 8,000 and gold is going to go to $6,000 or $8,000? That's what happened in 1980. The Dow only lost 20 per cent of its value but gold just went straight up.
Q. What do you realistically see happening?
A. When people say to me, what's going to propel gold to $2,000 or $3,000? I don't know. How could I have foretold the events of the 1970s, for instance? Here I think we have a multiplicity of events. We have an industry that's shrinking. We have central banks that are going to turn into buyers, not sellers. And the European central banks are going to run out of gold .... So I do think we're going to continue to see good times in this industry for a generation.
Q. People don't think gold has been in as big a bull market as base metals.
A. That's right. Copper went from 65 cents to $4. That's seven times. Gold is up three times. Oil went from $12 to $96. That's eight times. So, in effect, gold has been the lagging commodity in this hard-asset bull market.
Q. Are these exciting times?
A. Well, the 1970s were a lot of fun but they're generational bull markets. You have to wait 20 years in between. You've got to keep yourself busy. I must admit, being a bit older (and) having more money, this is even more fun.
COLIN MCCONNELL/TORONTO STAR
During his legendary career, Newmont Mining vice-chair Pierre Lassonde has preyed on the gold bull run. He envisions the metal soon hitting $1,000 U.S.
Sluggish miner has hopes of striking gold again with Dick O'Brien and Pierre Lassonde at the helm
Nov 16, 2007 04:30 AM
Lisa Wright
business reporter
Despite the recent correction, these are buoyant times for the bullion business. Just ask two of Newmont Mining Corp.'s golden boys.
One is the Denver miner's vice-chair Pierre Lassonde, an industry legend and a Canadian gold bug who is revelling in the precious metal's second major bull market of his career. While gold hit the skids this week after a two-month rally – it fell another $27.10 (U.S.) yesterday to close at $785.90 – he believes it's just a speed bump on the way to four-digit territory.
The 60-year-old former president of Newmont and founder of the old Franco-Nevada Mining Corp. has been something of a soothsayer when it comes to gold. He says pullbacks are to be expected when prices soar, and chalks it up to recent strength in the U.S. dollar since the two tend to move in opposite directions.
Gold has retreated from a 28-year high of $845.40 hit last week. The metal struck a spot price record of $850 in January 1980.
The other golden boy is Dick O'Brien, a new kid on the bullion block who is now running Newmont after a couple of years as its chief financial officer.
In his first Canadian interview since taking over as CEO four months ago, the 53-year-old showed he is wasting no time shaking things up at the sluggish Denver gold mining giant, steering it through a major restructuring.
The coveted yellow metal is also getting much harder to find and far more expensive to extract. The rookie gold CEO is now focusing on Newmont's leverage to the gold price, eliminating its hedge book – to take advantage of any price gains – and striking a friendly cash deal to buy Canada's Miramar Mining Corp. for $1.5 billion, marking the giant's foray back north of the border after tapping out reserves at its old Timmins-area mines.
Meanwhile, Lassonde was supposed to retire a year ago but he remains in the thick of things, working on the proposed $1 billion initial public offering of the company's merchant banking arm, also called Franco-Nevada.
O'Brien said he hopes to boost Newmont's share price and replace its dwindling reserves while restoring the historic miner's place in the market as the go-to gold senior, despite falling behind Barrick Gold as the No. 1 producer.
`New day dawning at Newmont'
Dick O'Brien took over as CEO at Newmont Mining four months ago. He explains where he sees the company headed in this interview with business reporter Lisa Wright.
Q. Why the sea change?
A. There's a new day dawning at Newmont. It's more than just that I became CEO. It's more a new mind frame. The company was a bit stuck with rising costs and I think there was a bit of a pall over it both from investors and internally. So one of the things I chose to do as the new CEO was to put the past in the past and try to move forward with some momentum and change some of the things we were thinking about, such as undoing the fixed-price hedges we had and trying to remove some of the lack of focus in the business.
Q. Is North America more in focus with the Miramar acquisition?
A. With that we will have a significant exposure back in Canada again. We enjoy being in Canada, in a resource-rich environment, and we can only hope that we can continue to find more opportunities there. So for us, it's about getting back to Canada. That being said we are a gold company; we have to go where the gold is. So I would like to see us not just focus on North America but focus on opportunities throughout the world.
Q. Barrick knocked Newmont off its perch as the No. 1 gold producer after merging with Placer Dome. Is your goal to get the top spot back?
A. It's not. My focus is to be the best gold company, not the biggest. I really don't believe Barrick did it to be No. 1; I believe they did the Placer deal for value. And I think if you get entranced with being the biggest, sometimes you lose the focus of trying to really do the best you can with every asset that you have .... So, yeah, at some point, would I love to be the biggest and the best? Well, sure, at some point, but it's not my goal today. My goal is to make Newmont the best company we can make it with the assets we have.
Q. Rumours keep popping up about Barrick taking over Newmont. Is that a concern?
A. My first job is to build value for this company through our own operations .... Do I worry about someone else coming in? I'd like to have enough time here to run this ship and get the thing moving in the right direction...people are going to do what they're going to do.
Q. It's been said that the cultures are too different to make a good match.
A. Well, I don't know because I haven't been inside of Barrick. I can tell you one criticism that investors lay at the feet of the majors is you guys don't have any growth. With a combination, investors would probably say exactly the same thing. When the rumour has come up, it has generally come from Canada. And Barrick seems pretty quick to say `not interested.' We've got plenty on our own plates. It doesn't mean that it wouldn't ever be imminent or it would be impossible, but most investors would say they're pretty happy with the size that we're at and I don't think they're looking for big combinations in the gold business presently.
Q. Are you on the current bandwagon of predicting a four-digit price like every other gold CEO out there?
A. I'm confident gold prices are going to continue to run here but I'm not going to put four digits or a time frame or anything else on it. We feel good about the direction. I think gold is really seen as a store of value in some of the financially turbulent times. But we're in the market consistently, good times, bad times (and) volatile times. We are just going to keep making the metal.
Will Dow-gold ratio hit one-to-one again?
Newmont vice-chair Pierre Lassonde looks back at where the price of gold was, and how high it might rise, in this interview with business reporter Lisa Wright.
Q. What do you make of this correction of gold prices?
A. Hey, a year ago it was at $600-and-something (U.S.), so it's still pretty good. We're just getting a bit of a pullback, which is healthy. But I do believe that over the next year or two we'll break right through the $850 (barrier). At some point in the next five years you'll see gold with three zeroes after the first number, we just don't know what number that's going to be.
Q. So where is gold headed?
A. I'll bring out my crystal ball (laughs). But everything is pretty well unfolding the way that we had anticipated and gold is responding primarily to the devaluation of the U.S. dollar. That correlation is the most important in terms of the gold price. We had foreseen that we were going to chase the old highs, the $850 (range), and just almost touched it last week.
Q. What's your theory on the price?
A. Something I've been pointing out since 1999 in our Franco-Nevada annual report is the Dow Jones industrial average divided by gold price. It will blow you away. The Dow represents financial assets while gold represents hard assets. And, over a 100-year period from 1920 to today, there are cycles. There are times to own financial assets, when the ratio goes up, and then there are times to own hard assets, when the ratio goes down because it's one against the other.
So from 1920 to 1929, you wanted to be in financial assets. From 1929 to 1935 you really wanted to be in gold. This is a very interesting thing because the financial asset peak was in 1966. And then the hard asset peak was 1980, so this was a 14-year bull market in hard assets. When you think about it gold went from $35 to $850. If I told you in 1966 that gold is going to $800, you'd say `Lassonde you're completely out of your mind. You're wacko.' But oil went from $2.50 to $50 in that same time. And you know what happened to real estate prices in Toronto in the '70s.
Now here's the real kicker. At the top of the hard-asset bull market, (1933), the Dow, which had been 370 at the top, bottomed at 37, and gold peaked at (about) $35. The ratio was essentially one-to-one. In 1980, the Dow was (about) 800 and gold was $800. One-to-one. You know where the Dow is today – (just over) 13,000. Gold is $800. In every bull market in the last 100 years the ratio came down to essentially one-to-one.
Q. Is this Dow versus gold theory picking up steam?
A. When you tell portfolio managers this, it scares the heck out of them. If the Dow was to lose 90 per cent of its value and go down to 1,200 and gold is at $1,200, you have one-to-one. But then they're wiped out. They're kaput. Or is the Dow going to come down to 6,000 or 8,000 and gold is going to go to $6,000 or $8,000? That's what happened in 1980. The Dow only lost 20 per cent of its value but gold just went straight up.
Q. What do you realistically see happening?
A. When people say to me, what's going to propel gold to $2,000 or $3,000? I don't know. How could I have foretold the events of the 1970s, for instance? Here I think we have a multiplicity of events. We have an industry that's shrinking. We have central banks that are going to turn into buyers, not sellers. And the European central banks are going to run out of gold .... So I do think we're going to continue to see good times in this industry for a generation.
Q. People don't think gold has been in as big a bull market as base metals.
A. That's right. Copper went from 65 cents to $4. That's seven times. Gold is up three times. Oil went from $12 to $96. That's eight times. So, in effect, gold has been the lagging commodity in this hard-asset bull market.
Q. Are these exciting times?
A. Well, the 1970s were a lot of fun but they're generational bull markets. You have to wait 20 years in between. You've got to keep yourself busy. I must admit, being a bit older (and) having more money, this is even more fun.
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