Peggy Kent is on the phone from Hawaii, but she is not talking about sun and surf.
She is at her vacation home on the holiday paradise of the Big Island, but her life isn't necessarily a day at the beach. She is all business, talking a mile a minute about her passion for gold mining. And, when your business is gold mining in a gold bull market, you make hay while the sun shines, as the ranch-raised Kent likes to say. Even on your vacation.
Once one of the movers and shakers of the Canadian mining sector, Kent, formerly known as Peggy Witte, is champing at the bit as she mounts a comeback as CEO of Century Mining Corp., a junior company listed on the TSX Venture Exchange that she founded in 2003 after a three-year sabbatical from the industry.
In her heyday as CEO of Royal Oak Mines, Kent staked out a reputation as a scrappy dealmaker and savvy builder of shareholder wealth. The company once boasted a market cap in excess of $1 billion and Kent was honoured as the Financial Post's Newsmaker of the Year.
|Bayne Stanley, Business Edge|
|Peggy Kent is on the phone from Hawaii, but she is not talking about sun and surf.|
However, Royal Oak's news clippings weren't always accompanied by rosy headlines. The company made headlines in the early 1990s over a bitter labour dispute at the company's Giant Mine in Yellowknife, where nine workers were killed by a bomb planted by a Royal Oak miner who was convicted of murder. Then, in the late 1990s, Royal Oak became one of numerous casualties of a low gold price and eventually vanished from the scene after going into bankruptcy.
Today, with the gold price trading over $600 US per ounce, the American-born Kent is positioning Century Mining to catch the big wave of a booming mining sector. And it might be unwise to bet against her. This time, Peggy Kent has the wind at her back.
1. Who was your most important mentor as a youngster?
"It was my mother (Gloria Kent). She was extremely hard working. She would get up in the morning and help my dad with the ranch, she did all the bookkeeping for the ranch, she taught school full time and managed to do a huge amount of charity work at the school and the hospital. Yet, there was never a time when she didn't have time to spend two or three hours a night on homework with us kids and there was always a home-cooked meal on the table. I don't know how she did it. She would get up at four in the morning and go to bed at 11 at night. She was named one of the outstanding Nevadans before she died. Her drive and the way we were raised has had a great deal of influence on my tenacity to get things done and the fact that I never stop."
2. What was your childhood dream?
"My career dream was to be a doctor. I always liked taking care of people and I always liked playing doctor. I started in school (University of Nevada-Reno) in music because my mother was a music major, but then I realized it wasn't my cup of tea because this was about the time of the Vietnam War. The university music department had a lot of problems with drugs and stuff, and I mean I was just a real straight-laced farm girl. I just didn't get along with anybody. So I decided to move over to chemistry because I wanted to be a doctor. But then I realized after about the second year of chemistry that if I didn't remember chemistry formulas, I wasn't going to do very well in medical school. After I graduated in chemistry, I had an opportunity to go into the mining school and I thought, 'Wow, this looks really neat. I get to go out, I get to play with rocks, I get to get dirty and do all kinds of things while still using my chemistry (degree).' " 3. How did your career in mining lead you to Canada?
"I thought of going to work for some of the bigger mining companies around the world and finally I settled on going up to Canada. I got a job at the Ontario Research Foundation as assistant director of metallurgy. We did work for almost every mining company in Canada, so I was able to travel and see most of the country. I absolutely totally fell in love with Canada and decided to start a business. I went across the road and started a business in competition and called it Witteck Development, doing consulting engineering. I had a bunch of Toronto-based clients who were in the investment banking business and they wanted to set me up in a publicly traded company. I formed a company called Neptune Resources in 1986 with my longtime business partner Ross Burns (now Century Mining's vice-president of exploration). I eventually stepped aside when Northgate Minerals made a huge investment in Neptune - it was $37 million or $40 million - and took control of our company. Within six or eight weeks of that, we took control of another company, Royal Oak Resources, which had some oil and gas in it. We spun the oil and gas out and turned it into a mining company. We immediately had 200,000 ounces of (annual gold) production, we inherited two management teams, we raised about $40 million in the marketplace to do it and we were off to the races with another new company.
As we acquired more projects and companies, I think at one time the company had a market cap of $1.1 billion. By 1999, we had 2,500 or 3,000 employees. It was a great ride building that company."
4. How did the company eventually end up going bankrupt?
"We bought the Kemess project in B.C. We did a high-yield bond of $175 million in the New York market. All the economics was predicated on gold being at somewhere between $325 and $350 (US per ounce) and copper being at around 80 cents a pound. As gold started to drop below $325 and the copper price started to drop as well, we got the mine up and running, but we couldn't make ends meet. We didn't think the gold price was going to drop below $300. We borrowed $120 million in a senior secured note from Trilon Financial (the Bronfman family's company) and put it into the mine. The price kept dropping and dropping. Of course, they had an ulterior motive. They wanted the mine. The only way I could fend them off was to file for CCAA (Companies' Creditors Arrangement Act). I got everybody to reorganize except for the senior secured creditor, which was Trilon. Of course, they cherry-picked Kemess, which is now cash-flowing $30 million a quarter (for Northgate Minerals). We didn't have any choice (going into bankruptcy). It was solely because of metal prices. It was a sad end to a great company story and 2,500 employees."
5. How difficult was that ordeal on you personally?
"It was hard in the beginning. But then I thought, like my mother would say, 'Wow, I've learned a lot, so what can I do with all of this information that I have?' I now understand how insolvency proceedings work, I understand Canada's CCAA proceedings, I understand exactly what Trilon did to get control of something that they wanted and get it for cents on the dollar. Shortly after that, I took another position to do a workout as a restructuring officer with another mining company. Then, I took a little breather from the industry to kind of get my health back in shape.
"When the gold price started to go again in 2002, I said, 'I've got all this knowledge, so where can I find assets that I can buy out of insolvency?' That's how we (Century Mining) ended up with Sigma (a mine in Quebec). It was in a receivership process in a Quebec court. With all my knowledge from Royal Oak, I was able to go in and basically deal with all the different classes of creditors and understand how all the processes work."
6. What was the most important lesson from the Royal Oak bankruptcy?
"When we got into financial trouble and the price of metal (gold) dropped below $300 (US) an ounce, we should have not taken on the senior secured debt. We should have filed the company into CCAA with a lot of money in the bank, shut the operation down, taken our unsecured noteholders out of New York and converted them into equity and waited them out. The problem is that, to a certain extent, I'm an optimist. The No. 1 mistake we made was taking that senior secured debt and the second mistake was who we took it from. If we'd taken it from a bank, they would not have wanted the operation, so they would have settled into some sort of insolvency proceeding and worked it out."
7. How do you reflect on the 1992 tragedy at Royal Oak's Giant Mine?
"The contract expired at the mine in the early '90s. The labour workforce at the Giant mine were the highest-paid miners in Canada. So we had to bring the mine into parity with the other operating gold mines in Canada if we were going to be competitive. The Giant mine had been run for years by Falconbridge and the union issues had commenced during the Falconbridge days. Anybody could have been running the mine and had they not rolled over and given the union what they wanted, anybody would have ended up in a strike. The tragedy at the mine was completely unforeseen. It was a situation where a miner you are working with day in and day out in dark spaces underground would kill nine of his own people that he had worked underground with as a team. It was a heartbreaking situation. Time passes, but at the time and for the next several years it was just devastating for me. When Roger Warren (who was convicted of murdering nine men) confessed and when we really understood what happened, it wasn't a situation the company caused. Had we shut the mine down and walked away, the union would have won. I mean, that's what they wanted."
8. What did you do after Royal Oak went out of business?
"A large cow-packing facility came up for sale that was about 10 miles from where we live (Blaine, Wash.). Again, it was an insolvency situation and I bought it. We were basically slaughtering about 300 head a day that were coming in from Canada. Then, mad cow (disease) hit and the U.S. government closed the border to cows over 30 months in age. Overnight, there was no prospect of the business operating because 90 per cent of our cows were coming from Canada. We then turned it into a grinding facility, grinding hamburger for supermarkets. About six months later, a case of mad cow was found in the state of Washington - and it was a cow that had been killed at a packing plant that we were buying our trimmings from to grind. With the border not being opened (for Canadian cattle) and the whole mad-cow thing touching so close to home, I just said 'forget it' and shut the grinding business down. (Crap) happens and you move on. I still have the plant and the 13 acres from that business as a real estate development. That was a several-million-dollar episode, but you can cover your sins pretty easily when you're dealing with real estate."
9. There are hundreds of junior mining companies listed in Canada. What sets Century Mining apart from the others?
"We're operators and 99.9 per cent of the junior exploration mining companies in Canada never would want to operate anything. They are explorationists, they want to find it, they want some other company to come in and buy it, and they want to drive on and they want to explore.
We want to buy things that have already been found or buy things with great potential. We want to develop things, build things and operate things. We're a group of people who have all major large-company experience, but we're operating in the junior company space today."
10. Which of your properties has the greatest upside potential?
"We believe the greatest upside potential is at San Juan (mine) in Peru. Again, it was my insolvency experience that allowed us to get this deal done. The family who had the property ran out of working capital in the late nineties, had never gotten back on their feet and owed a bank in Peru a lot of money. I walked into the bank and offered $2.5 million for $14 million worth of debt. That gave me control over the concessions and then I was able to cut the deal I wanted on the concessions. If I had never been involved with Royal Oak, we would never have this property today.
"The property is a district in Peru that is extremely mineralized geologically. We're currently only producing about 12,000 ounces (of gold) a year from two out of 35 known vein structures. We think we can get the main San Juan mine up to 60,000 to 80,000 ounces a year. The upside is that we're sitting on three absolutely fabulous exploration properties, one of which has the signature to be a very large porphyry copper (property) that's a company-maker. The second one is a gold property and the third one is a mixed gold/copper vein structure property."
11. Are you comfortable with the current political environment for business in Peru?
"Yes I am, very much so. If (Alan) Garcia (Peru's new president) is going to succeed in this government, he has to run this government as a coalition government and we believe that he will."
12. Is Century Mining looking at expanding its portfolio of properties and looking at any acquisitions?
"We're definitely looking at takeover targets and new properties. We're trying, however, to stay focused in Quebec, Ontario, Peru and in countries around Peru like Chile and Ecuador. If you start to wander off, say to Asia or to China, you've only got so many people and they can only sit on airplanes so long."
13. What's your outlook for the gold price?
"My outlook for the gold price is healthy. The $500 to $700 range is a really comfortable range. The interesting thing is that if you study the gold market, you'll see that compared to the last gold cycle, a large percentage of the gold that's been trading in this range has all been financial and influenced by hedge funds. The actual physical (buying) from the jewelry side is down and we all know that once funds start buying gold, it's one day in and the next day out. I see really good support for gold from a physical takeoff and from a production cost standpoint in the $500, $525, $550 range."
14. So what's wrong with all those people who have been predicting $1,000-per-ounce gold?
"What they haven't taken into account is that if gold even goes to $750 or $800 and stays there for a period of time, and volatilities are high and the forward curve is high, you could be hedging $900 or $1,000 gold. And when you can do that, you can almost recover gold out of sea water. So, you know, you've got to look at the supply/demand side. Your supply side could double at $750 gold. All these South African mines that have been shut down will start up again at these kinds of prices and all of a sudden the gold that is coming on the market will increase significantly. As gold goes up, the jewelry business, which accounts for about 30 to 40 per cent of the gold that's consumed, is dropping. There is a supply/demand factor in the gold business, even though people don't want to think about it."
15. Based on the potential of your company, are you mystified by the current share price ($1.14 at the time of the interview)?
"There are a lot of reasons for the share price. We're trading at about a 40- or 45-per-cent discount to our NAV (net asset value). A lot of people (companies) in our sector are trading at a zero NAV or a little positive on NAV. If you take a look at what we've done in the last year, the company's changed a lot. We've closed out our convertibles (debentures) and we had to raise a lot of money at 35 to 40 cents. I'm a little surprised that it is as low as it is, but overall, we've got good shareholders, every day we've got more and more institutions buying the stock, and I think everybody is waiting for us to perform."
16. You have a reputation as a pretty feisty and no-nonsense entrepreneur. Is that accurate?
"I'm very bottom-line focused and I'm very focused on giving my shareholders value for their investment. And sometimes when you're focused on those things, the touchy-feely things in life play second fiddle. I look at the numbers. And the numbers say all. We've gotten where we have by buying sort of old, retread assets. I mean, the asset at Sigma (the Quebec mine) will never be a crown jewel. But the asset that we bought in Peru could end up giving us some very nice returns. So with gold prices being where they are and with there being so many gold companies out there right now, everybody's fighting for the deal. And the people who are going to get to finish line first are the ones who are creative and have the experience to do the creative deals. I hope that that sets us apart from everybody else and my management team has tenacity like no other."
17. As an experienced dealmaker, what's your perspective of the takeover wars in the Canadian base metals sector involving Inco, Falconbridge and Teck Cominco?
"Inco and Falconbridge should have merged 20 years ago or they should have found a way to do a joint venture in the Sudbury Basin. There have been millions and millions of dollars lost by shareholders with Inco and Falconbridge not forming a joint venture in the earlier days. I mean, you've got two companies that are building roads beside each other, that are duplicating efforts, that are duplicating management teams, etc. So given that situation and given that it was every investment banker's dream to bring the two companies together, the fact that all these extra parties are out there now like Xstrata and Teck and everybody, it was just probably never meant to happen. Your organic growth is not happening right now because the way a large company gets their growth is by buying the exploration properties, developing them and building mines. But when the properties aren't there to buy because the industry's been dead for so long and the geologists haven't been putting the dollars in the ground, then the only way to grow is through mergers."
18. Are you surprised by Barrick Gold's hostile bid for NovaGold Resources?
"A little bit. But you know they're doing it for camp consolidation, but they're also doing it for exactly the same reason. There aren't any properties to buy. Where is Barrick going to get its flow of properties to develop? When we were in Royal Oak, we had the five mines running and we had to have at least one property that was in construction, we had to have two that were in development, we had to have three in pre-feasibility study and we had to have five in advanced exploration. And we were just a little company. So if you're a Barrick you've got to have quadruple that many. It'll be interesting to see what happens there."
19. When you sit back and ponder your life and career, how do you feel about the way things are today?
"From a personal perspective, everything is great. My kids are grown and I'm back travelling again three weeks out of every month. But from a business standpoint, I'm really, really missing having a bigger company. We are out there turning over every stone and we're trying to find value for our shareholders. In the Royal Oak days, we were buying a mine every year. (But) the majors aren't selling their operating mines and there are so many people clamouring in the same space that it is really hard to find value. As far as my career in the mining industry goes, I think I'll be here to stay, probably. When I spent a couple years out of it, I realized it's really my love."
20. What's your most important goal beyond business?
"To keep myself physically fit. I lost a lot of weight when I took the time off from the industry. I lost 135 pounds. When I'm physically fit, my head is screwed on straight. And then I can take care of my family, I can take care of my husband, I can take care of my business. When I left the industry in 1999, I was just a mess. All the stress of the insolvency was wearing on my shoulders and there were a lot of sleepless nights, worrying about the situation. So now I go to the gym regularly and I try to eat right. When I come home from work, I go straight to the gym, then I come home from the gym, I sit down with my kids, I pour myself a glass of wine, I play with my kids for a couple of hours and that's how you deal with it. We all wish that we had $500 million, we all wish that I had a company with a million ounces of production and 3,000 employees and all I have to do is snap my fingers and everything is going to be beautiful.
But those of us who are in the mining business right now are pretty darned happy people. We've got to make hay while the sun shines, and I know my team is happy about the situation. We just drive on."
* Title: President/CEO, Century Mining Corp.
* Born/raised/age: Fallon, Nev./52.
* Residence: Blaine, Wash.
* Education: University of Nevada-Reno, bachelor of science (chemistry), master's of science (metallurgical engineering).
* Career: Kent founded Century Mining in 2003. She has spent almost her entire career in the mining industry, including a 10-year stint as CEO of now-defunct Royal Oak Mines. She has founded and financed two publicly traded mining companies and four private companies. She began her career in Canada in the late 1970s as assistant director of metallurgy with the Ontario Research Foundation.
* Favourite entrepreneur: Peter Munk, chairman of Barrick Gold.
* Favourite escape: Her home on the Big Island, Hawaii.
* Favourite pastime: Campfires on a Hawaiian beach.
* Drives to work in: 2004 Cadillac.
* Profile: Century is a junior mining company primarily focused on gold production from two mines - the Sigma-Lamaque mine in Quebec and the San Juan mine in Peru.
The company also owns extensive exploration property in Peru, the dormant Carolin gold mine in southwestern B.C. and nine precious metals exploration properties in the historic Juneau Gold Belt in Alaska.
* Key Stats: Century forecasts 2006 production of 100,000 ounces of gold at a cost in the $325 to $350 US per ounce range.
* Stock Price (CMM:TSXV): $1.09 (52-week range, $0.29-$1.89).
* Website: www.centurymining.com
* Head Office: 441 Peace Portal Drive, Blaine, Wash. 98230.
* Phone/Fax: 360-332-4653/ 332-4652.
(Gyle Konotopetz can be reached at email@example.com)