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INSIGHT-Global miners face succession crisis as old guard nears retirement

Mon 20th July, 2015 6:00am
By Susan Taylor and Nicole Mordant 
    TORONTO/VANCOUVER, July 20 (Reuters) - As if slumping 
commodity prices and unhappy shareholders were not enough, 
global mining companies are also facing a looming succession 
crisis. 
    Several mining CEOs have reached or are nearing retirement 
age and industry executives, recruiters and analysts worry that 
there is not enough people with the right skills and experience 
to replace the old guard. 
    It is the price of a 'lost generation' - those now in their 
40s who failed to find jobs in the industry during a mining 
downturn in the 1990s and early 2000s and have drifted 
elsewhere.  
    "There is a shortage of potential CEOs because the industry 
doesn't invest in people," said Mark Bristow, the 56-year-old 
Chief Executive of mid-tier gold miner Randgold Resources 
 RRS.L . 
    As a result, companies may need to promote relatively green 
management or recruit outsiders, raising the risk of costly 
strategic mistakes at a time when the industry can least afford 
them. 
    For example, Kinross Gold  K.TO  replaced CEO Tye Burt, a 
former investment banker, in 2012 after its share price cratered 
and a blockbuster acquisition went sour. 
    Burt led Kinross to a $7.1 billion purchase of Red Back 
Mining in 2010, a deal that contributed to more than $6 billion 
in writedowns and provoked deep investor discontent.  
    Mining companies typically focus on building projects when 
they plot the future, not career paths, said Douglas Groh, 
portfolio manager at Tocqueville Asset Management. 
    "The industry is not good at succession planning. It is more 
in the moment," said Groh, whose fund is a major gold sector 
investor.  
    The boom-bust nature of the industry makes recruiting and 
grooming the workforce particularly challenging. 
    "The mining cycle tends to be the same length as a 
university cycle," said Mark Selby, CEO of developer Royal 
Nickel  RNX.TO . "People go into a program because it's hot and 
by the time they graduate, it's not."  
    Industry data shows a 15-year hiring slump in mining that 
mirrors a similar generation gap in the oil and gas industry. 
 ID:nL1N0XX2DK  (http://reut.rs/1HuJETi.) 
  
    "Some companies will not survive because they don't have 
enough competence to operate as a standalone company," said 
Bristow.   
    The talent pinch extends beyond the C-suite, said Ryan 
Montpellier, executive director of Canada's Mining Industry 
Human Resources Council.  
    "It's hard to find seasoned engineers with 15-20 years 
experience," he said. 
     
    HEADING FOR THE EXIT 
    At the world's 10 biggest public mining companies, four of 
the top executives are over 60, and their median age is over 59 
compared with 56 for CEOs of the top 10 S&P500 companies. (http://reut.rs/1M8ZQQD) 
    Several mining CEOs are well into their 60s and seen on 
their way out. (http://reut.rs/1LjyDsI) 
    "They've made money, they're in a bad market - they've 
probably been through one before - and they may not want to be 
in one again," said Clive Johnson, CEO of small Canadian gold 
miner B2Gold  BTO.TO .  
    Freeport-McMoRan's  FCX.N  CEO, Richard Adkerson, is 68, Rio 
Tinto's  RIO.L  chief, Sam Walsh, is 65, First Quantum's  FM.TO  
Philip Pascall is 67, and New Gold  NGD.TO  CEO Robert Gallagher 
is 64. They have not detailed their retirement plans,though, and 
some who have done so have no designated successors yet. 
    Centerra Gold  CG.TO  said in March that CEO Ian Atkinson, 
65, would retire by year end, but is still searching for 
successors. 
    Harmony Gold Mining  HARJ.J  shares fell 6 percent on 
Thursday after the company said 62-year-old CEO Graham Briggs 
would retire and that it was seeking a replacement. 
    To be sure, some miners have mapped out succession plans. 
    In a "signal to the market", Primero Mining  P.TO  CEO 
Joseph Conway, 57, gave up his President title earlier this 
year. And Silver Standard Resources  SSO.TO  named Paul Benson, 
52, as its new CEO effective August 1, with the retirement of 
John Smith, 58. 
 
    EATING SEED CORN    
    With many commodities skipping along multi-year lows, mining 
companies have been forced to delay projects, cut staff and 
slash costs. That means the next generation of CEOs will need 
operating expertise more than deal-making or financial acumen to 
hone efficiencies and sell non-core assets, experts say. 
    "It's a very limited supply of experienced people who know 
the industry and who have the capability of getting it out of 
the very difficult place it is in today," said John Byrne, 
managing partner at global recruiter Boyden World Corp.   
    Some companies, however, such as debt-laden Barrick Gold 
 ABX.TO , believe that hiring an outsider is just the medicine 
they need. 
    Barrick founder Peter Munk told skeptical investors in 2013 
that new Executive Chairman John Thornton's experience as a 
banker and international academic could attract capital and open 
doors to governments. 
    It's too soon to tell whether that strategy will pay off for 
the world's biggest gold miner.  
    Many mining executives say outsiders struggle to grasp the 
unique challenges of mining, noting that it can take decades to 
determine if a new mine will be profitable. 
    They add that lawyers and accountants without a mining 
background are overly concerned with pleasing stock analysts. 
    Others argue that the mining industry's poor performance 
shows it needs a fresh perspective.  
    "We have an industry where our core skill is eating our own 
seed corn. We don't bother to plant the corn, we eat it," said 
Benjamin Cox, the CEO of junior miner Aston Bay Holdings 
 BAY.V . "I'm a second generation mining executive; I wonder if 
there will be a third." 
 
 (With additional reporting by Silvia Antonioli in London; 
Editing by Tomasz Janowski) 
 ((susan.taylor1@thomsonreuters.com; +1 416 941 8083; Reuters 
Messaging: susan.taylor1.thomsonreuters.com@reuters.net)) 
 
Keywords: MINING GLOBAL/EXECUTIVES
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