Ian Telfer tells Michelle Rivera how his company benefited from taking a huge risk.

Most people have heard the phrase, “The moment you’re born you start to die.” The same philosophy can be applied in the mining industry: the day you open up a gold mine, it starts to run out of gold. The biggest challenge in gold mining is replacing reserves, which has prompted Ian Telfer, CEO of Goldcorp, Inc., to not let acquisition opportunities pass his company by. “This has been a company that has grown by acquisition over the past four years, and fortunately for us, we acquired mines as the price of gold increased,” Telfer said.

We have been growing the company in a rising market. Whenever you’re buying hard assets on Monday and the price of gold goes up on Tuesday, it makes the deal look like a good one.”

Ian Telfer, CEO

Betting on gold
Before becoming Goldcorp, the company was a small mining company in Vancouver called Wheaton River. The company had a gold mine that had run out of gold, minimal cash, and no production or revenue. Five years ago, Telfer joined the company of six employees, leading it through a series of acquisitions (just under a dozen) and spending more than $4 billion in the first four years.

Goldcorp now has a head office of 50 employees and a total of 11,000 employees in remote mining locations in 10 countries. So far this year, Telfer has spent approximately $8 billion on acquisitions. Last month, Goldcorp became the second largest gold-mining company in the world by market capitalization.

“When I took over the company, I believed the price of gold was going to soar,” said the chief executive. “It’s like buying real estate; if you know the price of real estate is going to go up tomorrow, you’ll buy as much as you can today.”

This belief, according to Telfer, differentiated Goldcorp from the majority of other mining companies, who at the time were more hesitant about taking huge risks. When moving to acquire assets, Goldcorp was one of two bidders, and sometimes the only bidder. “Because we had faith in the price of the commodity, we were extremely aggressive and won the auctions. We took a huge risk and got it right.”

Doubling up
In the beginning of November, Goldcorp acquired Glamis, the premier intermediate gold producer, with low-cost mines and development projects in Nevada, Mexico, and Central America. Telfer anticipates that the acquisition will double Goldcorp’s resources and reserves base, growing the company by as much as 50% over the next four years.

“Glamis was a successful company, and the amount of gold it had in the ground was growing larger as it drilled more holes. Because finding gold is becoming extremely difficult, Glamis represented a major opportunity as it was finding gold faster than anyone else,” Telfer said. By 2007, Goldcorp hopes to bring in more than 700,000 ounces of gold from the Glamis mines.

Opportunistic industry
Managing Goldcorp’s rapid growth has been straightforward, according to Telfer, mainly because the mining business is significantly different from other industries. Mines are usually located in remote locations and come with an infrastructure. “When you acquire mining companies, you pick up all their regional offices. They need to be left where they are—you can’t consolidate them,” said the CEO.

Mining companies have small head offices in comparison to the size of its company. For example, when Goldcorp acquired Glamis, it only had to add five people to its main office, a significantly different process from putting thousands of new employees together. While there are slightly more challenges for the accountants and lawyers, Goldcorp doesn’t have to deal with any cultural changes as it grows. “You buy one mining company and add three people, and buy another and add two more. Our employee base grows over time.”

The company has development projects in Mexico, Quebec, and the Dominican Republic. Although Telfer said the company has a number of projects on its plate right now, he still needs to keep his eyes open, as the mining industry is extremely opportunistic. “The opportunities that come along are unique, and if you let one go by, you won’t get that opportunity again,” he said.

Large mining companies buy mines and never sell them, he explained. Because they don’t come back on the market, mining executives have to think hard about not letting an opportunity sneak by. “If someone else buys it, we’ll never get that chance again,” Telfer concluded.