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An accountant by training, David Garofalo served as chief financial officer at gold producer Agnico Eagle Mines Ltd. before coming to HudBay in 2010.

Investors in HudBay Minerals Inc. don't like the surprise resignation of one of Canada's best-known mining executives.

Shares in the Toronto-based copper and zinc producer slid more than 11 per cent in early trading as shareholders reacted to the news, announced late Frday, that chief executive David Garofalo would be leaving HudBay at the end of this year to take over the reins at giant gold miner Goldcorp Inc.

Mr. Garofalo was named Mining Person of the Year by Northern Miner in 2012 and is widely praised for having built HudBay into a highly regarded base-metal producer over the past five years. Despite plunging commodity prices and a miserable market for miners in general, 16 of 19 analysts who follow HudBay label the mid-sized miner a "buy."

Mr. Garofalo will be replaced by Alan Hair, HudBay's chief operating officer since 2012 and a 30-year veteran of the mining industry.

"This is a natural launching-off point for me," Mr. Garofalo said in an interview. "All four of our mines are operating at optimum capacity, our cost structure has fallen by 50 per cent ... the business is operating very solidly."

Mr. Garofalo praised his successor's operational prowess and promised the transition will be seamless. Mr. Hair, a 20-year HudBay veteran, has overseen the construction of three mines in recent years "on time and on budget" and he is well versed in all aspects of the company's business.

"He's been at my hip for the last five years ... helping to formulate strategy and implement it," Mr. Garofalo said.

An accountant by training, Mr. Garofalo served as chief financial officer at gold producer Agnico Eagle Mines Ltd. before coming to HudBay in 2010. At the time, HudBay was in turmoil, having gone through four chief executives in two years.

Mr. Garofalo focused the company on projects in low-risk jurisdictions and instilled new financial discipline. He said he had not intended to leave "a job I love" but found the scale of the Goldcorp job impossible to resist when he was approached.

Chuck Jeannes, who will step down as Goldcorp's chief executive in April following the gold producer's annual meeting, has earned an enviable reputation for steering the gold producer through the commodity supercycle.

Unlike some rivals, Goldcorp did not take on suffocating debt or engage in ill-advised acquisitions at the top of the cycle. As a result, it has been expanding at a time when many gold producers are looking to shed assets.

"What Chuck has built there is truly remarkable," Mr. Garofalo said.

Analysts seem to agree. Anita Soni of Credit Suisse said in a note that Mr. Jeannes is leaving Goldcorp well positioned with two new mines in operation and a strong balance sheet.

At BMO Capital Markets, Andrew Kaip was also positive. "We see [Mr. Garofalo's appointment] as a positive signal to investors that Goldcorp is embarking on a new era while continuing to focus on execution and the balance sheet," he wrote in a note.

Mr. Garofalo said he will work closely with Mr. Jeannes over the next few months as he strives to learn more about Goldcorp. At HudBay, he was well known for investing in junior miners and for making bold acquisitons, such as last year's hostile takeover of Augusta Resource Corp., owner of the Rosemont copper project in Arizona.

However, he stressed that acquisitions are not about growing for growth's sake. "Miners that have focused simply on increasing ounces of production haven't typically done very well," he said.

He says his key yardstick is net asset value – essentially, the net present value of future cash flows. Driving down costs, extending mine lives and making new discoveries are other ways to expand net asset value, he said.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 18/03/24 2:44pm EDT.

SymbolName% changeLast
AEM-N
Agnico-Eagle Mines Ltd
-1.14%55.3
AEM-T
Agnico Eagle Mines Ltd
-1.24%74.84
G-N
Genpact Ltd
+0.42%33.26
G-T
Augusta Gold Corp
-1.12%0.88
HBM-N
Hudbay Minerals Inc
-0.29%6.91
HBM-T
Hudbay Minerals Inc
-0.32%9.35
S-N
Sentinelone Inc Cl A
+4.84%23.16
WS-N
Worthington Steel Inc
-2.53%29.29

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