Chuck Jeannes is the first to acknowledge he walked into the top job at Goldcorp Inc. at a sweet moment.
It was January, 2009, and Goldcorp's shares were rising in tandem with the price of gold as recession-whipsawed investors sought a safe place to put their money. Then, even before Jeannes got through his first quarter as CEO, the price of gold hit a record $1,000 (U.S.) per ounce, a psychological breakthrough that heralded a new era for the precious metal.
At this heady moment, Vancouver-based Goldcorp was also being touted as one of the lowest-cost, fastest-growing producers in its peer group. Goldcorp was, in fact, just getting comfortable with its senior gold status, which it earned through a series of complex, strategic and wealth-creating deals made a few years earlier by such mining icons as Ian Telfer, Kevin McArthur and Rob McEwen-all former Goldcorp CEOs. By the time Jeannes took the reins, Goldcorp had edged ahead of Denver-based Newmont Mining Corp. to become the world's second-largest gold producer, with a market capitalization of around $25-billion.
And the story behind the numbers pointed to more good times ahead. In the course of all that dealmaking, Goldcorp had amassed more than a dozen properties scattered across the Americas-a low-risk part of the world compared to other resource-rich but volatile regions such as Africa, where some of its competitors have operations.
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Moreover, Goldcorp was, and remains, 100 per cent unhedged to the steadsly rising price of gold. That's a sharp contrast to its main rival, Toronto-based Barrick Gold Corp., the world's biggest bullion producer. It wasn't until last year that Barrick made the strategic, yet painful, decision to eliminate its hedge book. The multibillion-dollar writedown Barrick took as a result made Goldcorp appear that much more nimble and attractive to many investors.
Summary? "I stepped into the best job in the world," says Jeannes, 51. "It's just a matter of delivering."
Above his desk is a painting of a pair of spawning salmon, a piece Jeannes bought shortly after getting the top job. For the avid fly fisherman, it's a bit of a stand-in for his increasingly limited vacation time. "I can't think of anything I'd rather do with my spare time than to stand in the middle of a river, with a cigar, casting to rising trout," Jeannes says, leaning back in his chair and miming the act with his hands. "You can't stand in a river and make casts, and spot fish, and decide which hook to throw, and deal with the wind-and look over your shoulder for bears once in a while-and think about anything else. You can't think about business. It's relaxing."
Fishing is also strategic, and not that unlike running a gold company-especially the part about those lurking bears. The big difference? When you're a gold company, the bears can be welcome. The worse the markets get, the more nervous investors are, and the more likely they are to turn to gold.
But the groundswell for gold has also created more investment options, in particular exchange-traded funds, which have fostered new competition for producers such as Goldcorp. Gold companies are also under constant pressure to find more stuff in the ground that will allow them to keep growing. That means either more exploration or buying other producers, or both. There's also the trick of keeping costs down.
What do you think of the prospects for gold? Are you betting hard on flight to safety? Or is it the next bubble -- fool's gold, as it were? Share your thoughts with our community of investors.