When it comes to running a company, the CEO has a huge influence on corporate performance. The demands of a CEO require that this leader possess deep industry experience, a clear vision for the company he or she is running, and a know-how for assembling a winning management team to execute that vision (even if it means "borrowing" from your previous company).
Gary Goldberg, CEO of Newmont Mining Corp. (NYSE:NEM), fits that mold. Having spent about 15 months preparing for the top spot at Newmont, after he was hired in late 2011 as the company's COO, he elevated to the CEO position in early of 2013. As a trained mining engineer, serving as chairman of the National Mining Association from 2008 to 2010, Goldberg is the first Newmont chief executive with an educational background in the mining field since the mid 1980s.
That said, Goldberg is no stranger to running things, having spent 30 years moving up the ranks at Rio Tinto (NYSE:RIO), including a stint as CEO of Rio Tinto Minerals from 2006 to 2011. He also held leadership roles in Rio's gold and copper divisions. So he's educated by experience in Newmont's two main products. Perhaps more interesting, however, is that Golberg brought more from Rio than just his experience when he jumped to Newmont.
A little help from my friends
There's no doubt that working at international mining conglomerate Rio Tinto looks good on a resume. And that helps explain why Goldberg got the top job at Newmont. But it's rather interesting that Newmont's chief operating officer, executive vice president of technical services, vice president of strategic relations, and executive vice president of sustainability and external relations all spent a good deal of time at Rio, as well. That's exactly half of the executive leadership team supporting Goldberg. (If you include Goldberg in the count, then more than half of Newmont's current leadership came from Rio.)
Each of these employees joined Newmont after Goldberg, so it's fair to suggest he's got the team he wants in place. That said, the company's CFO spent time at Cliffs Natural Resources in various leadership and accounting roles, and Newmont's executive vice president of human resources previously worked for Sun Microsystems. The company's general counsel and executive vice president of strategic development both essentially rose up through the ranks at Newmont. So there's some breadth at the top, balancing out the Rio alums' take on the world.
That's a good thing, since taking what works at one company and superimposing it on another isn't always a winning strategy. Each company has its own culture and style, acting almost like a living, breathing organism. You need to be able to work within that or you'll be working against it. With a 50/50 break of Rio and non-Rio people on the executive team, there should be enough independent voices to provide a wider view of the business. In other words, Newmont is far from a "little Rio" and that's a good thing.
The team at the top of Newmont appears to be crafting both a good story and coming through on its promises. For example, the current focus is on three pillars: improve the underlying business, strengthen the portfolio, and create shareholder value. In 2014, the company reduced its all-in sustaining costs per ounce, a measure of how much it costs to operate a mine, by 10%. Gold production was down year over year, but that was because of noncore asset sales. In fact, production came in at the high end of the company's original guidance for the year.
Those asset sales, meanwhile, strengthened Rio's balance sheet amid weakness in commodity prices. At the end of 2014, cash stood at $2.4 billion, up roughly 50% year over year. Newmont also paid down $100 million on a term loan. Although the shareholder dividend is tied to the price of gold, taking the determination of the disbursement out of management's hands, the company is clearly trying to fortify itself to survive through a tough market for commodities -- certainly a good thing for shareholders.
At the same time, the company isn't stopping growth, but it is taking a conservative approach to expansion. It has six projects either soon to be completed or that will be finished in the next couple years that it expects will sustain production levels despite expected declines at older mines. The most important aspect of these projects, however, is that they are at or near existing mines. So there's less development risk and a higher chance of achieving expected outcomes.
A solid team
The crew from Rio appears to have things well in hand at Newmont, with Goldberg (I can't believe I managed to get through this entire article without making a gold/Goldberg pun!) clearly spelling out what he's focused on and, largely, coming through on his promises.
With 2014 being only Golberg's second full year at the helm, it seems he's gotten through the transition period and is now truly running the show with the management team he wants. Although not exactly "Rio lite," Newmont appears to be in good hands.
Reuben Brewer has no position in any stocks mentioned. The Motley Fool owns shares of Cliffs Natural Resources. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.