...decisions, Garofalo has drafted in Paul Harbidge, previously head of exploration at market darling Randgold. Drill rigs are now turning “aggressively” at Goldcorp's Coffee deposit in the Yukon, which Garofalo bought for C$520m ($406m), shortly after he arrived. Coffee, he says, will grow into a 5 to 10 million ounce gold camp, “Minimum. That's the investment thesis. The downside if we're wrong, and of course there's inherent risk in anything you do... it isn't fatal if you're wrong.”
Further out, he is eyeing Goldcorp's vast NuevaUnión project in Chile. It would be a multi-billion dollar investment, at least five years from construction, but NuevaUnión has “an immense resource,” Garofalo says. “Mines aren't found, they're made over time, and we have to make that into a mine.”
“Because the balance sheet's so solid, there's no conceivable scenario where we have to go and raise any capital. We have $3bn of undrawn debt capacity, we're generating $500m to $600m of free cash flow per year right now, I have all the financial capacity I need to build out the pipeline I have, so the prospect for per share value appreciation I think is quite immense.”
Garofalo has personally spent over C$1m buying Goldcorp's stock since its latest results. But the market's attention has been trained on the assets Garofalo is selling. Goldcorp is dumping its Marlin gold mine in Guatemala, the Alumbrera copper-gold mine in Argentina and its Los Filos mine in Mexico's choppy Guerrero state, Reuters reported in July.
Guerrero is ripe for consolidation, if a little
lawless, and Los Filos is well positioned to roll-up surrounding assets. Selling the mine slices “another 10 per cent” off Goldcorp's “sharply depleted” production rate, says Peru-based IKN. But Garofalo wants to focus elsewhere.
Mining boss Rob McEwen, one of Goldcorp's early founders, speedily backtracked last year after telling BNN that his company, McEwen Mining, had a “good relationship” with gangsters growing drugs in the region. (“My use of the words ‘good relationship’ was careless”, McEwen quickly clarified.) Los Filos needs a “dedicated team”, Garofalo says, to transition it from an open-pit to an underground mine. Selling the mine would “remove a distraction”.
“We're also looking to sell Cerro Blanco in Guatamela... Chuck did an exceptional job at continually rotating the portfolio. He always, when he brought something in new, sold some-thing off the bottom. That's why I inherited such a solid balance sheet. I hope to emulate that.”
Goldcorp has always been acquisitive: Andean, Probe Mines, Canplats and Virginia Gold have all variously been fed into the bottom of its tower in Vancouver, in deals totalling $5bn. “You have to keep buying stuff or you shrink,” chairman Ian Telfer told The Globe & Mail last year, after a run at Osisko Mining. Could the board outbid anybody? “Uh, yes.”
Garofalo is only tweaking the message. By growing asset values, rather than production, he has several levers to pull, but as ounces are mined and dividends paid out, acquisitions will be inevitable. Banker Jason Attew moved from Toronto to Vancouver earlier this year, joining
Goldcorp from BMO, and Garofalo has put him to work weighing takeovers, investments, joint-ventures and sales. Nothing is off the table.
Does Garofalo still speak to Sean Boyd, his former boss at Agnico? “Sean and I have talked off and on about teaming up on projects,” Garofalo replies. “Teaming-up makes a lot of sense, to share the technical and capital risk associated with new, large-scale mines. Two heads are better than one; two balance sheets are better than one.”
At Agnico, HudBay and now Goldcorp, Garofalo has a lengthening list of takeovers to his name. They have one thing in common. After an initial offer, he has never upped his bid. “We've always put full price on the table and challenged the market to prove us wrong,” Garofalo says. “By and large, we weren't wrong.”
It is a subtle message, quietly delivered, but it is tactically brutal. Much like Garofalo himself. He heads back to Goldcorp's office.