...quarters its C$18bn ($13bn) market cap has fallen behind Barrick Gold and Newmont Mining. Goldcorp is now the “laggard versus its senior peers”, says Scotiabank.
Garofalo's making changes. He has replaced all but one of the company's mine managers, whilst cutting Goldcorp's head office by a third. He has closed the company's exploration office in Nevada and taken out its layer of regional management, which sat between Goldcorp's mines and its Vancouver headquarters.
“The first few weeks I was locked in a room with the top executives and I got a really good sense of who bought into the organisational design that I had,” Garofalo says. “There was a degree of separation between me and the mine managers I wanted to eliminate, flatten out the organisation.”
“Under the previous structure they felt somewhat disempowered. They didn't even have control over their life-of-mine plans. The reserve calculations were centralised. All of that stuff only served to take responsibility out of their hands.”
Garofalo isn't asking for output growth. The industry has a “fixation on ounces”, he says, but rather than mine-out assets quickly, he wants mine managers to look “holistically” at how they can boost the dollar value of their camps each year, even as gold comes out of the ground.
They can lop-out costs to boost margins, or drill deposits, kicking-out closure obligations. Each decision is a measurable trade-off. Alternatively, mines can buy neighbouring assets, within hauling distance of their plants, to
achieve greater scale. “Mine managers have the authority to do that,” Garofalo says, “to bring ideas forward.”
It is a long term policy shift, with very short term implications. Some are positive. Goldcorp has laid-out cost savings of $250m since Garofalo arrived. “We're going to easily meet that.” Others have been tougher for the market to swallow.
At Penasquito, Garofalo's new manager, Brian Berney, an Australian civil engineer, has deferred output this year to focus on stripping back waste. Under the company's prior model, Penasquito was being mined for its readiest ounces. Garofalo's shift may boost the long-term value of the asset, but it has dented Goldcorp's production this year.
Goldcorp's shares “got slammed” when it unveiled its quarterly results in July, commentators noted, with output down by nearly a third. Penasquito was “severely affected”, wrote analysts at Dundee, putting in its worst quarter for several years. Analysts looking at the output figures ask whether Garofalo, in restructuring Goldcorp, has moved too fast.
Garofalo seems indifferent to the criticism. Share prices track asset values over the long term, he argues. Look after the assets and the share price will look after itself. “If you're growing your value, you'll attract the capital over time.”
After years of rapid growth, did his predecessor Chuck Jeannes hand on the baby, when he saw it was about to cry? Garofalo laughs. “Chuck's not like that at all. The operating challenges I've unearthed are entirely a function of the phase that we're in. Chuck was
in build-phase, he was building two $2bn mines at the same time, so when I come in and see an operational issue, I'm thinking, okay, great, because that's low-hanging fruit. If I've got a bad deposit, I can't fix that. Chuck unequivocally put together a collection of good deposits. The operational issues are fixable.”
Speaking quietly at a quick rate, Garofalo is measured and meticulous, with hawkish features and a goofy grin. His parents moved from Italy to Toronto, where Garofalo grew up, living in the same neighbourhood as dozens of cousins. “We all played road hockey together and I laugh at it now, because I thought we were the biggest goofs growing up, we didn't have any grand visions of anything.”
He was “pretty lackadaisical” at school, his sister “set the pace academically” and Garofalo “kind of followed” his friends into business school, holding down a job at a grocery store, because it was unionised and paid well. Having qualified as an accountant, Garofalo was...