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Report on Business David Garofalo to leave Goldcorp after company merger, Newmont CEO says

Goldcorp chief executive David Garofalo sits for a photograph at the company's headquarters in Vancouver, B.C., on Sept. 14, 2016.

DARRYL DYCK/The Globe and Mail

Goldcorp Inc. chief executive David Garofalo will leave once the company completes its merger with Colorado-based Newmont Mining Corp., says the man who engineered the deal.

Mr. Garofalo’s fate had been a question mark ever since Newmont and Vancouver-based Goldcorp announced their US$10-billion union on Jan. 14. But in an interview with The Globe and Mail, Newmont CEO Gary Goldberg confirmed there is no role planned for the Goldcorp boss once the merger, which will create the world’s largest gold miner, is done.

“David will not continue with us,” said Mr. Goldberg, who will run the new company, to be called Newmont Goldcorp. “He’s been supportive, and the whole [Goldcorp] team has been really great to work with as we work through this process.” Newmont’s president, Tom Palmer, will also assume that title in the combined company, as previously announced. Mr. Goldberg says Newmont will take its time to meet with other Goldcorp executives to select people for other roles, particularly since its North American operating headquarters will move from Elko, Nev., to Vancouver as part of the deal. The departure will trigger a severance package that should top $10-million for Mr. Garofalo, largely due to Goldcorp stock awards.

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Mr. Goldberg spoke to The Globe in an interview Wednesday morning at Newmont’s headquarters in the Denver suburbs, just before he hopped on a plane to New York for investor visits made necessary by the market’s initial reaction to the quickly assembled deal to buy Goldcorp.

Newmont’s shares topped US$35 on Jan. 11, the final trading day before word of the deal emerged, but dropped nearly 9 per cent on the day investors heard the news. The shares are now inching upward, closing at US$33.71 Wednesday, suggesting Mr. Goldberg is gaining traction in selling investors on the merits of the tie-up.

“As we’ve walked this through with people – with our investors, and with Goldcorp investors – we’ve seen support for the transaction,” said Mr. Goldberg, who will celebrate his sixth anniversary as CEO March 1. “They understand this is not about getting bigger, it’s about getting better. These are sets of complementary assets.”

Mr. Goldberg said Newmont heard two chief concerns. One, was the company truly able to do due diligence for a deal that was put together in a matter of weeks? And why didn’t Newmont’s estimates of the cost benefits of the deal include numbers from improvements at Goldcorp’s underperforming mines?

Mr. Goldberg said Newmont, which already had some familiarity with Goldcorp, did site visits to Goldcorp’s Canadian properties; its Penasquito mine in northwest Mexico; and Cerro Negro, the southern Argentinian mine that Goldcorp describes as its “most remote mine site.”

“We’re very comfortable we had the time to go through and understand their operating assets and also meet several times with the senior folks on their projects,” he said. “We found very good technical and operating people on the ground, and it gave us good confidence in terms of how we see their plans laying out going forward.”

The synergy value, he said “is a smaller number than what people might have expected because we haven’t included any of the continuous improvement, full-potential work,” he said, using the terms Newmont uses to describe the operating changes it’s been making in its existing portfolio of properties.

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“We don’t qualify that as synergy, we qualify that as what we do to run the business going forward. We haven’t flagged a number yet for folks, but we have flagged what we’ve delivered up to now, which is one and a half billion [US] in cost and efficiency improvements in Newmont’s portfolio, and that equates to [US]$65 to [US]$75 an ounce in improvements in our business.”

“They’ve had a process in place, but we think our process will be more sustainable and likely deliver better results than where they’ve been going right now,” he added.

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