Peter Marrone speaks during the annual general meeting of Yamana Gold shareholders in Toronto on May 4, 2011.MIKE CASSESE/Reuters
Peter Marrone has few regrets as he prepares to walk away from the big Canadian gold mining company he founded and is now poised to sell to a pair of Canadian precious metals companies.
Last week, Toronto-based Yamana YRI-T agreed to sell itself to Agnico Eagle Mines Ltd. and Pan American Silver Corp. for US$4.8-billion. That offer topped an earlier and deeply unpopular bid by South African miner Gold Fields Ltd., which was originally worth US$6.7-billion. Owing to the poor performance in Gold Fields shares in the months that followed the May deal, the value dwindled to US$4.2-billion by the time Agnico and Pan American swooped in.
While Yamana had been open to being acquired by Agnico and Pan American months ago, and potentially avoiding all of the drama, Mr. Marrone said in an interview on Wednesday that he had little choice but to go with Gold Fields originally. The deal was simpler, he said, with Yamana investors being asked to accept only stock in one company, as opposed to shares in two companies and cash. But more importantly, Gold Fields was willing to pay more.
“When we were looking at the options available to us, the Goldfields’ transaction appeared to be the best of the transactions that were available to us,” he said.
Yamana won’t budge on deal terms as uncertainty looms over US$6.7-billion Gold Fields takeover
What Mr. Marrone did not anticipate, and seemingly few at Gold Fields did either, was the viscerally negative reaction the deal would receive on the Gold Fields side. Among the concerns raised among its shareholders was the 42-per-cent premium Gold Fields was offering. But some also asked why the fast-growing Gold Fields was buying anyone, never mind Yamana. Also throwing both Yamana and Gold Fields for a loop was the persistent weakness in the gold price once the deal went live, which knocked the wind out of the entire sector.
If the ends justifies the means, then as soon as that Agnico and Pan American bid surfaced, all was forgiven. Shareholders with Yamana, Agnico and Pan American quickly embraced the transaction as making strategic sense. For example, Yamana will sell its 50 per cent share in the Malartic mine to Agnico, meaning Agnico will now have full ownership of the asset. Meantime, Pan American will buy Yamana’s suite of gold and silver mines in South America, adding to its already large portfolio in the region.
With Gold Fields walking away, there’s little chance the deal won’t close as scheduled early next year, meaning Mr. Marrone can afford to look back at his time at Yamana in a circumspect fashion.
Originally a lawyer, then a banker and finally a chief executive officer, Mr. Marrone started Yamana in 2003. His timing could barely have been better. It was the start of an epic bull market in which gold bullion rose from a few hundred dollars an ounce to a peak of US$1,900 in 2011. During that time, Yamana grew from a $110-million junior to a mid-tier gold company with a global footprint worth $14.9-billion.
Like many of his peers, including Barrick Gold Corp, and Kinross Gold Corp., Yamana is worth considerably less now than it was at its 2012 peak.
Mr. Marrone acknowledged there have been plenty of “trials and tribulations” along the way. Those included technical problems at mines, production snafus, asset sales at prices lower than analysts wanted and the incursion of a lot of debt after its 2014 acquisition of its share in the Malartic mine. Mr. Marrone faced the wrath of shareholders, who voiced their disapproval to his compensation package in 2015, when he lost a say-on-pay vote.
As much as Yamana has struggled, in the past few years the company has gone some ways toward redeeming itself. Its compensation practices are on par with the rest of the industry and every say-on-pay vote in the past few years has been a slam dunk. Yamana crucially has returned to basics, by increasing production, cutting its costs and virtually eliminating its debt. Joe Foster, portfolio manager with New York-based Van Eck, recently anointed Yamana as one of the best-run gold companies in the world.
Mr. Marrone knows his record isn’t perfect, but he said he’s proud nonetheless of what he’s achieved.
He turned 63 last week, and recently became a grandfather. That said, he’s far from done with the gold mining business. While priority No. 1 is closing the deal with Agnico and Pan American, he’s also thinking of his next act. One possibility is doing it all over again, and starting a gold company from scratch.
Or, he says, he may go the merchant banking route, which would mean buying stakes in undervalued mining assets, fixing them and selling them again for a profit. Either way, this likely isn’t the last time you’ll read about Mr. Marrone and his gold industry exploits.
Niall McGee