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(Photograph by Sean Sprague for Report on Business Magazine)
(Photograph by Sean Sprague for Report on Business Magazine)

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Goldcorp's big shoes Add to ...

Shortly after the Glamis-Goldcorp union was finalized, Telfer was named Goldcorp's chairman and McArthur its CEO, bringing Jeannes under his wing once again in the role of executive vice-president, corporate development. From that point on, Goldcorp continued to pursue an aggressive growth strategy, snapping up billions in assets and selling off parts of its business to help fund its project pipeline. One of those sales included its 49 per cent stake in Silver Wheaton Corp. (spun out from Wheaton River in 2004), exchanged for $1.56-billion, in what became one of the largest-ever stock sales in the Canadian mining industry. Goldcorp was on the fast track to growth.

Then, in late 2008, McArthur surprised investors by announcing he would retire from Goldcorp "for personal considerations." The CEO mantle hadn't worn well on a died-in-the-wool engineer who liked to keep his hand in. The company he oversaw boasted 4,000 employees distributed across 11 mines, four development projects and numerous exploration efforts-McArthur could barely find time to visit a mine site.

Within weeks, Jeannes was appointed president and CEO. Although the suddenness of his ascent was a surprise, this was the sort of job Jeannes had been set on ever since he started working with McArthur at Glamis. "I really wanted the chance to be the number-one guy, and run a mining company," Jeannes recalls. "I just never dreamed it would be the second-largest gold company in the world."

In times of rising gold prices, running a gold-producing company sounds pretty straightforward. That's particularly true if you subscribe to the "peak gold" theory, which holds that, even if gold prices do drop, they won't have far to fall, given shrinking global production and reserves. Scarcity makes a precious metal that much more precious.

Of course, most gold company chief executives are believers in the peak gold theory, and all are bullish on price. Jeannes's own faith in the rising price has been strengthened recently by Europe's growing debt crisis. More investors are turning to gold as a safe haven and a hedge against rising inflation. This sentiment, in turn, pushed gold to record-breaking heights beyond $1,200 in May.

Jeannes believes the price still has room to rise. "It's clear that gold has reasserted itself as an investment asset class," Jeannes says. "If you remember back to the 1970s, the common thinking was that any diversified portfolio should contain 5 per cent to 10 per cent gold. In the 1990s, if you mentioned gold, you were considered a dinosaur. With what's happened with the world financial crisis and the performance of gold as a safe-haven investment and strong portfolio diversifier, gold is definitely back."

Rising gold prices also add an urgency to dealmaking, a part of the job that hasn't come that easily for Jeannes. None of the acquisitions he has made since taking the top job have come without a fight.

Late last year, Goldcorp found itself in a bidding war with a joint-venture company called Minera Penmont S. de R.L. de C.V., owned by Newmont and Mexico's Fresnillo, over a junior miner called Canplats Resources Corp. Goldcorp eventually won the battle, but only after raising its offer twice, finally to $300-million. The move reflected Goldcorp's determination to gain control of the Canplats Camino Rojo project in Mexico, located near Goldcorp's Peñasquito mine.

Earlier this year, Goldcorp also beat out Barrick for a controlling interest in the El Morro gold-copper project in Chile. Goldcorp bought the 70 per cent stake from the Chilean arm of global mining titan Xstrata PLC by lending $463-million to a smaller company called New Gold, which had a right of first refusal. New Gold agreed to transfer the stake to Goldcorp in exchange for an additional payment of $50-million, while retaining its 30 per cent interest in the project. Barrick is contesting that deal in court, alleging it was executed illegally. The challenge hasn't stopped Goldcorp from moving ahead with the project, which it expects to reach production by 2013.

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