Outspoken Goldcorp CEO plans to step down

Rob McEwen, the outspoken head of a company that made "gold is money" its motto, plans to step down as chairman and chief executive officer and has asked the board of directors to search for a replacement.

Mr. McEwen said Goldcorp Inc. needs a new boss to take it to the next stage of its development.

Goldcorp "has grown significantly in size and complexity and so have the demands of the many governmental, regulatory and exchange agencies it reports to," Mr. McEwen said in a letter to Goldcorp's board of directors that was released yesterday by the company. "As a result, we are at an important transition point in our corporate evolution where a new CEO with different skills is required."

Mr. McEwen, 54, said he would step down as CEO as soon as a successor is found but, with the approval of the board, would remain as chairman for an unspecified period to ensure an orderly transition.

Goldcorp shares yesterday closed at $16.57, down 2.2 per cent, on the Toronto Stock Exchange.

Mr. McEwen has been Goldcorp's CEO for 18 years. He is known for aggressive promotional tactics, including placing radio advertisements for the company's shares -- an unusual strategy for a mining company -- and being a regular speaker at industry trade shows and events. In 2000, Goldcorp launched an on-line exploration challenge that offered cash prizes to teams that identified new exploration targets at its flagship Red Lake mine in Ontario.

Analysts and industry observers said his departure could reflect differences at the board level over the firm's strategic direction. Goldcorp gets nearly all its gold from Red Lake, where a new high-grade zone discovered in 1995 reinvigorated the decades-old mine and pushed its gold production costs to among the lowest in the industry.

The company is cash rich -- it reported assets of $380.5-million (U.S.) at the end of the second quarter, including cash and short-term assets of $302.9-million and $46.6-million worth of gold bullion.

But even though Goldcorp is digging a new shaft that will expand its Red Lake operation, there are questions about how the company will continue to grow. Two former executives left the firm in April following a disagreement over growth strategy. Industry participants say the two former executives favoured an acquisition and that Mr. McEwen was against the move. Mr. McEwen has said that there was a difference over how to expand the company and create shareholder value.

Analysts said Goldcorp may pursue a merger or acquisitions under a new CEO. Some gold companies have been pursuing mergers as a way to boost reserves and bolster their financial clout.

"Goldcorp is a one-mine company so a combination is not out of the question," said Michael Fowler, an analyst with Desjardins Securities Inc.

In recent years, Goldcorp has kept back some of its production, stockpiling inventory in the belief that gold prices are headed higher.

Investors were surprised last December when the company announced that it had sold its stockpile. Later the same month, Mr. McEwen announced that he had sold 5.5 million Goldcorp shares for proceeds of about $28.4-million (Canadian). The stock sale amounted to about half of his total holdings in the company.

Given the company's mantra that the gold price was headed up and that gold is money, some investors were worried that Goldcorp was losing faith in the gold outlook.

Mr. McEwen said the sales were made for personal financial reasons and that he remains bullish on the gold price.

Goldcorp subsequently began rebuilding its inventories and as of June 30, held 3.7 tonnes in inventory and said it was withholding about 10 per cent of production until the end of the year.

In a report yesterday, UBS Securities Canada Inc. analyst Tony Lesiak said Mr. McEwen's departure "signals change to the market."

"Despite the company's growth aspirations, [Mr. McEwen]has not been able to accomplish larger deals," he wrote. "We view that a new CEO may bring a more aggressive stance."