CEO believes in letting strong people lead

Ian Telfer could well be excused for turning cartwheels these days over his magnificent ride in the burgeoning gold industry. But a quarter century in the mining industry has taught Telfer just how quickly the tide can turn and fortunes can be lost for those who live and die at the mercy of commodity prices.

This would explain why Telfer is practising restraint and keeping his feet firmly planted, even at a time when the 59-year-old native of Oxford, England, is bullish on the outlook for the precious metal.

Telfer certainly has had the Midas touch in recent years. His wheeling and dealing parlayed with a rocketing gold price transformed Wheaton River Minerals from a startup to an enterprise worth about $2.4 billion in a three-year span. That's a pretty impressive run, particularly for one who says he was nearly tapped out financially after his brief fling with a dot-com incubator named Itemus ended in that company's bankruptcy five years ago.

Today, the 59-year-old Telfer is sitting pretty on Burrard Street in Vancouver as CEO of Canada's second-largest gold company, Goldcorp Inc., the company that merged with Wheaton River a year ago. It boasts a market in the $10-billion range and operates the famous Red Lake Mine in Northern Ontario.

Wayne Chose, Business Edge
Ian Telfer has Goldcorp on the leading wave of the gold-prospecting industry.

Sitting pretty - but definitely not cartwheeling.

1. Who was your most important mentor as a youngster?

"It was my father (John Telfer), who was an accountant. He was smart and wise and patient. He was very successful. He had the type of values people had in the fifties and attempted to pass them on."

2. Your first job in the mining industry was as a financial analyst with Hudson Bay Mining and Smelting. What do you remember about your early years in the industry?

"Hudson Bay was in the base metals business and base metals prices were very low. So that was where I first learned how little management can do in the face of a low commodity price. You were virtually helpless, especially in those big unionized base metal mines in remote locations. You can't shut them down, you can't put them on hold and you can't send everybody home. You are stuck. But when the commodity prices turned, in six months you could repay all the losses you had in four years."

3. What were your most difficult times in the mining industry?

"It was when I was running Vengold in the late 1990s. The price of gold was around $270 (US per ounce). At that time, we were trying to become the largest shareholder in Lihir Gold, which we achieved. However, to do that, I acquired shares from the government of Papua New Guinea and another shareholder. They extended credit to me to do that and we thought the price of gold was going to go up at any time. So we ended up with more debt than equity, basically, so the company was technically bankrupt. The shares I had were worth $80 million and the debt I owed was worth $100 million. So the stock traded at five or six cents (per share) as people anticipated the end was nigh. On Sept. 29, 1999, the first of the Central Bank accords was struck (in which European Central Banks agreed to limit their gold sales) and gold went up $30 US in one day and $40 the next day. All of a sudden, the shares I had went up, so I sold them all in one day and paid off the banks. After that, the gold price went right back down and stayed down for another year and a half. So if I hadn't done it that day, we'd have gotten into worse trouble."

4. What's it like living at the mercy of commodity prices?

"It's frustrating. You have to be a perennial optimist and always think the worst is behind you. There's enough people that believe that and you all talk to each other. So at every gold conference, no matter how low the price of gold was or how few outsiders attended, all the insiders thought tomorrow will be a better day. So you live in that kind of world for a long, long time."

5. Why did you move into the tech sector in 2000?

"When I blew out all of the Lihir shares, I was left with a shell (public company) with about $30 million in it. The stock was trading at 20 or 30 cents. At that point, there was zero interest in precious metals and zero interest in gold. Nobody cared, nobody wanted to invest in it and no one wanted to hear about it. The rage at that time was technology and so I met with some high-tech wizards and basically turned the company over to them. If I did make a mistake, it was sticking around. I should have just left then. I stayed around to help them and stayed on the board of directors (he was vice-chairman) and that was a mistake. Like so many people in that market, they'd never seen a down market and extended (debt) too quickly. Then, when the market turned, the company had to declare bankruptcy."

6. What was that experience like for you personally?

"It was very difficult. There were lots of warnings to shareholders that unless there was a new financing, the company was going to run out of money. A number of directors were able to get off the board so they didn't have to have that (failure) on their resume. But with all these young kids working at the company and struggling and everything, I felt I had to hang in and do whatever I could to take it down as smoothly and painlessly as possible. I wanted to make sure all the legal things were done properly so there would be no fallout from it afterwards, like lawsuits or threats. The other thing you learned is how hard it is to take a company into bankruptcy properly. It's very hard work and so unsatisfying because no one's getting paid. I didn't sell one share. Some people made fortunes on the stock because it went from about 20 or so cents to almost $5. That was a huge negative experience. And I was quite tapped out after that, even though I wasn't about to lose my house or anything. When you have shares that are worth tens of millions of dollars, you live a certain way. Even though it's not really cash, you can feel it there. Then when that disappears, all of a sudden you start to live differently. That was a blow."

7. How tough was it for you to move on after that experience?

"I had no plans. I had no idea what I was going to do next. Gold was $270 US or something and that's a difficult situation to get into. The reason that so many mining companies have done so little to grow during this doubling in the price of gold (since 2001) is because they've been kicked in the teeth every seven years for the past 25 years. So now they're six times bitten and still shy. So that's the way I felt in the summer of 2001. But then Frank Giustra (the former chairman of Yorkton Securities) contacted me and said, 'Look, I'd like to get back into the precious metals business so let's go into business together.' I said, 'Fine, let's give it a try.' We were looking for a (investment) vehicle and we happened to pick Wheaton River. It was basically a shell (company), but it had $10 million in it. And $10 million in the summer of 2001 was a king's ransom. Nobody had any money then."

8. What was your first deal with Wheaton River?

"I became CEO in October (2001) and in December we started looking for assets to buy quickly because we thought the price of gold would start going up. The first thing we learned about was a mine in Mexico (Luismin mine) and we acquired that for about $75 million US (in April 2002)."

9. You've earned quite a reputation for your knack for swinging deals and raising capital. What do you think has made you successful in those areas?

"Well, in 25 years in the mining and resource finance business, I stick with what I start. I don't abandon the shareholders, the employees or anybody else. So that's helpful when you're dealing with people the second or third time. In negotiating with other people, I don't feel I have to squeeze the last nickel out of every deal. That tends to keep the deals less acrimonious and then people are quite willing to deal with you another time. In my career, I've bought three significant assets from Rio Tinto (a mining company based in London, U.K.) in three different decades, one for TVX Gold, one for Vengold and one for Wheaton River. For some reason, I got along with them. They trusted me and I trusted them. Some people, in negotiations, seem angry and it seems they want to show how tough they are. And I don't believe in that. When you're acquiring resource assets, the only thing I know for sure is that whatever the price I'm paying is the wrong price. It's worth either a heck of a lot more or a heck of a lot less, one or the other. So to fight and fight and fight for the last penny doesn't work. You have to make a reasonable decision and you want to buy when commodity prices are rising, but I guess I always leave a little bit on the table for the other person. As a result, the deals get done in a more friendly way, they get done more quickly and if the person has another opportunity down the road, maybe they're going to say, 'I'll talk to Telfer or Goldcorp because we seem to get along with them all right.' "

10. When you started Wheaton River, did you envision that it could become a company with a market cap of about $2.4 billion?

"No. People say to you, 'How can you do this when nobody else has really literally done this before?' The company's market cap (since the merger) is now a little over $10 billion and it has all happened in a little over four years. When assets were for sale, Frank Giustra and I absolutely believed the price of gold was going to go higher. So in evaluating assets, everybody else was using $300 US gold and we were using $325 gold. So we'd think something was more valuable than the next person and the seller would end up dealing with us. And then when gold was at $325, we were at $350. For instance, when Rio Tinto had a couple of people looking at their assets, we were willing to pay their asking price right off the bat while people were arguing with them or negotiating with them. So we just had more courage in our conviction and we were willing to use higher prices in our evaluation. If you think interest rates are going to one per cent, you're going to pay more for a house down the road on your street than a guy who thinks interest rates are going to 10 per cent."

11. You recently hired an apprentice from the University of Ottawa as an executive assistant. How is that working out?

"The University of Ottawa set up the interviews and it was very difficult to choose among the candidates. We picked Melanie Pilon and she's been terrific. She is curious, keen, competent, extremely well organized and fits in very well with all of the employees. She fits in extremely well."

12. How do you think your management style differs from Rob McEwen (former Goldcorp CEO)?

"He (McEwen) was involved in a lot of operating type of decisions. Many of the decisions that McEwen would be interested in, I leave to the people at the operations.

That's the biggest single difference between us. My view is that you hire strong people, you give them their lead and let 'em go. And you don't interfere on a micromanaging type basis. With our (recently acquired) Placer assets, we now have nine mines, so I couldn't interfere if I wanted to."

13. What's your long-term vision for Goldcorp?

"Our idea was to get to two to three million ounces (in annual gold production) and we're sort of there. But the one negative thing about mining is that every time you start up a new gold mine, it's immediately running out of gold. So of course you have to think how you're going to maintain what we've got here going forward. At the current time, with the assets, we can stay above the two-million-ounce mark for about six or seven years. Going forward, I'd like to put assets in place where people could see us staying between two and three million ounces for 20 years. I don't have the aspiration to try to outgrow Barrick, Newmont Mining and Anglo-American Gold (the world's three largest gold companies, based on production). Let them be the largest and grow the tallest. But I'd like to see if we can stay in a range of production and then maybe upgrade our portfolio of assets as we go forward."

14. Geographically, where do you see the most opportunity for expansion?

"We have been pretty disciplined in staying within North and South America and that's where we intend to stay. We've picked up a mine in Australia and we are keeping it, but we're trying to focus on North and South America. I guess we're the largest gold miner in Canada (from an operational perspective) and we are now in Chile, Argentina, Brazil, Mexico and the U.S."

15. Do you have any deals on the table today?

"We always have deals on the table. We're always talking to people about lots of things and you can never predict which ones will reach a positive conclusion or choose the timing.

"I wouldn't want to speculate as to when or what might happen, but we want to set up a situation so that people can see that we have reserves in production a long, long way into the future. If we can come across assets that will help us do that, we will continue to buy them."

16. How do you see Barrick Gold's takeover of Placer Dome affecting the industry?

"It makes another really large-capitalization company available to investors. So you now have two companies, Newmont and Barrick, in the $20-billion range (in market cap). It's been a long time since the gold mining industry had gold companies that big and now the very, very big pension funds can invest in them. I think there will be efficiencies that can be put in place in terms of their operations. Another thing it does do for a lot of the smaller companies that are hoping to get bought out is give them one less buyer that could take them over. Before, the little companies could dream about getting bought by Newmont or Barrick or Placer, now you're down to Newmont or Barrick. It takes away a potential acquirer from the industry."

17. What's your outlook for the price of gold?

"Having come through all those years when it was below $350 US, I'm obviously thrilled to see it at around $550 now. I'm very bullish on it. I think that the U.S. dollar is going to have to decline. It didn't decline in '05 but I think it will in '06. And then the gold price will just be an anti-U.S. dollar thing going forward. India's and China's economies are growing and they buy a lot of gold jewelry and I expect that trend will continue. Also, mine output is declining for the first time in my career in this business. This year, mines are going to produce less than they did last year. So I'm bullish on gold for the next 10 years. Wow. It could certainly get to $800 US. But I'd say it'll be between $500 and $800 US for the next 10 years."

18. You've had quite a run with Wheaton River and Goldcorp in the past few years. What's that been like for you?

"It's been a great ride. It's very exciting and satisfying. But when you've been through tough times in your career, you're aware of how circumstantial success like this is. With the other things I've tried in the last 25 years, I worked just as hard and I thought the ideas were just as good. But you didn't have the commodity doubling on you in four years as you're building a company. So you're very appreciative and respectful of your success, and also aware of how much of it is due to circumstances beyond your control."

19. In spite of your confidence in the gold market, do you still fear the possibility of tough times eventually returning to the sector, particularly considering how volatile the gold market is historically?

"Well, just based on your experience, you're more conservative even though you're virtually certain that the price of gold is going to go higher or stay as high going forward. When you were in your 30s, you didn't sell a share because you were so confident. Now, even though you still may have the same level of confidence, you do take a little bit off the table just for your family, just in case it does for some reason turn the other way."

20. It's 2010. Gold is trading at $800 US an ounce and Goldcorp shares are in the stratosphere. What will Ian Telfer be doing?

"Well, that's a good question. I would say my role model in that situation would be Peter Munk (founder and chairman of Barrick Gold). Peter Munk is now in his mid-70s. He has stayed on as chairman of Barrick. He lets other people run it on a day-to-day basis, but he goes to the board meetings and is involved in big decisions like the takeover of Placer and things like that. I think that'd be a great role. But for now I'm not thinking about that. I'm having too much fun. I know this is going to sound corny but life is about the journey, it's not about the destination. So enjoy the journey."

Ian Telfer

* Title: President/CEO, Goldcorp Inc.

* Born/raised/age: Oxford, England/Toronto/59.

* Education: University of Ottawa, MBA in finance; chartered accountant.

* Family: Married with two children.

* Career: Telfer was appointed president and CEO of Goldcorp on Feb. 24, 2005, as the company merged with Wheaton River Minerals. During the previous three years, he was chairman and CEO of Wheaton River. Prior to that, from 2000 to 2001, he was vice-chairman of now-defunct technology company Itemus. Telfer has spent 25 years in the mining industry, including stints as CEO of Vengold (the company that was transformed into Itemus) and TVX Gold. He began his mining career as a financial analyst with Hudson Bay Mining & Smelting.

* Accolades: In 2005, Telfer received the Ernst & Young Entrepreneur of the Year award for the Prairie Region. He has also been a recipient of the Murray Pezim Award for success in financing mineral exploration from the BC and Yukon Chamber of Mines.

* Drives to work in: A three-year-old Mercedes Benz.

* Boyhood idol: Elvis Presley.

* Favourite entrepreneur: Rupert Murdoch.

* Favourite business book: Conspiracy of Fools, by Kurt Eichenwald (on the Enron scandal).

Goldcorp Inc.

* Brass: Ian Telfer, president/CEO; Peter Barnes, executive vice-president/chief financial officer; Russell Barwick, executive VP/chief operating officer.

* Profile: Goldcorp became Canada's second-largest gold producer, next to Barrick Gold, with the recent takeover of Placer Dome Gold by Barrick. Goldcorp operates mines in North America, South America and Australia, including the Red Lake Mine in Northern Ontario, Canada's largest gold mine.

* Production Boost: In a side deal of the Barrick/Placer takeover, Goldcorp acquired Placer's Canadian gold assets, which increased the company's annual gold production to about two million ounces.

* Recent Stock Price (TSX:G): $29.42 (52-week range, $15.30-$30.08).

* Website:

* Head Office: 200 Burrard St., Suite 1560, Vancouver, V6C 3L6.

* Phone/Fax: 604-696-3000/696-3001.

(Gyle Konotopetz can be reached at