Photo credit: David Dorken/dwdorken.com
When David Garofalo moved into the head office of HudBay Minerals last summer to take the role of president, CEO and director, he took an armful of awards
with him. His work over 12 years at Agnico-Eagle Mines Limited and eight years before that at Inmet Mining Corporation, earned him the title of Canada’s
CFO of the Year by Financial Executives International Canada in 2009, as well as TopGun CFO by Brendan Wood International, and Best Investor Relations by a
CFO by IR Magazine in 2009 and 2010. Garofalo has continued to set the mark for management, again earning recognition from IR Magazine. The latest addition
to his collection is the 2011 Best Investor Relations by a CEO award.
CIM: You have earned a good share of recognition for the way you engage investors. What is it that you think you do that captures people’s attention?
Garofalo: I have consistently engaged with investors, analysts and salespeople, and I’ve been doing it for many years in good times and bad. This discipline is important. Mining is inherently risky, and
sometimes you have bad news. When this happens, you can’t hide under your desk. You have to redouble your efforts, and face analysts and face investors and
sometimes face their wrath. That will earn you a lot of respect. I learned that from Sean Boyd, my former boss at Agnico-Eagle, who is probably one of the
best communicators among mining CEOs internationally.
CIM: What do you think it takes to lead well in the mining industry today?
Garofalo: I think you need clarity of vision and purpose. You have to have very stringent criteria for how you build your business. Mining is such a geographically diverse business that an organization risks spreading itself too thinly, in which case, it’s very difficult to execute on your growth
objectives. The prime lesson is to really know what you’re good at and focus on opportunities and skills where you have a competitive advantage, and grow
your business accordingly.
CIM: So when you are evaluating new talent what are you looking for?
Garofalo: Whenever we hire highly skilled people, we try to evaluate whether the candidates might be able to run one of our business units someday or become an executive. Yes, we would like them to have strong technical skills, but also a sense for business. I like to see a willingness to understand
where their weaknesses are on the business side and to address those through continuing education – which I’m more than happy to pay for. A good engineer who is willing to do an MBA, for example, is worth a lot more than a person who just wants to plot drawings for the rest of her life.
CIM: Does the industry need to increase the diversity of its workforce?
Garofalo: We have come a long way in the mining business and at HudBay in particular. There is certainly much more diversity in our workforce. One of ourmost promising young engineers, Kim Proctor, is in charge of our $700 million Lalor project in Manitoba. In addition to being responsible for the largest
construction program in HudBay’s 85 year history, she is heavily involved in Women in Mining Canada, an organization focused on advancing the interests of
women in the minerals exploration and mining sector. Also, given the skills deficit in our business now, we have to think out of the box in terms of
attracting talent from less traditional geographies for Canadian companies, such as Eastern Europe, Asia and Latin America.
CIM: From a broader perspective, what do you think is the biggest challenge the mining industry is facing?
Garofalo: All the near-surface high-grade deposits have been found and it’s become far more challenging to replace what’s been pulled out of the ground. So across the sector, growth is very difficult to achieve, particularly for the senior companies that have very large reserve bases.
CIM: What’s the response?
Garofalo: In 2011 at HudBay, we have, at $78 million, one of the largest grassroots exploration budgets in our history, and we are also drilling deeper in northern Manitoba than ever before, and exploring for – and discovering – precious metals in what has been traditionally perceived as a base metal camp. We’ve also invested in more than 15 junior companies for a total value of $140 million to further supplement and diversify our exploration focus.
CIM: What are the top challenges from a financial standpoint?
Garofalo: A lot of jurisdictions don’t want mining, so getting large-scale deposits online very quickly has become an increasingly difficult proposition. It is more time-intensive and certainly more capital-intensive because of the finite pool of human resources and capital equipment. As well, a number of governments dealing with significant fiscal challenges are looking at the profitability in the mining sector and ways to increase their tax take. That
would be a short-term and short-sighted fix to their fiscal problems as it could have very severe long-term implications for the mining sector. Governments
intent on increasing mining tax rates could end up pushing marginal projects out of the picture and that would ultimately shrink their long-term tax