December 3, 2012 / 2:58 PM / 6 years ago

Newmont Mining CEO to depart, COO to succeed him

(Reuters) - Newmont Mining Corp (NEM.N) on Monday said Chief Executive Richard O’Brien will step down, making it the third major gold miner this year to replace its top manager as the industry seeks to boost dwindling production and control mushrooming costs.

O’Brien, 58, will step down on March 1 as head of the world’s No. 2 gold producer and also will retire from the board. Chief Operating Officer and President Gary Goldberg will take the reins.

Goldberg, 53, joined Newmont in December 2011. He will face the task of reviving Newmont, where annual gold sales are down about 15 percent since 2006 as it has struggled with rising costs and falling output.

“They have no growth and over the last five years production has actually fallen,” said George Topping, a mining analyst with Stifel Nicolaus in Toronto, adding that Goldberg will need to address operational issues at Newmont’s existing mines.

Topping said Newmont will have to look for other assets to stabilize production.

“That’s going to have to involve the acquisition of smaller mining companies,” he said.

Other gold miners with recent top management shuffles include Barrick Gold Corp (ABX.TO), where Aaron Regent was ousted from the top job at in June, and Kinross Gold Corp (K.TO), where Tye Burt lost his job at in August.

Greenwood Village, Colorado-based Newmont has struggled with development stage projects, including a delay at its $5 billion Conga project in Peru after violent protests over the massive gold mine. It also took a write-down as it shelved its Hope Bay development in Nunavut, a northern Canadian territory.

On the operations side, Newmont’s third-quarter income attributable to shareholders tumbled 26 percent as costs rose and output fell at mines in Indonesia, Ghana and Australia.

“The issue of rising costs and mine development delays is industry wide,” said Elizabeth Collins, a mining analyst at Morningstar in the Chicago area.

“The new CEO will be facing the same issues. It is getting increasingly hard for the largest gold companies to grow production without suffering from extremely high costs.”

Shares of Newmont closed down 2.97 percent at $45.69 on the New York Stock Exchange, in line with a broader sell off of gold mining stocks.


Costs for gold miners have risen sharply in recent years, as soaring metal prices prompted a surge in mine development. This put pressure on everything from staffing to equipment, taking much of the shine off robust bullion prices of around $1,717 an ounce.

Barrick, the world’s top gold miner, has grappled with soaring capital costs and repeated delays at its Pascua-Lama mine in South America. Kinross took a massive write-down this year related to its Tasiast mine in Mauritania, which has failed to live up to expectations.

Newmont, which has projects around the world, said last month it expects 2012 production to be at the lower end of its target range of 5 million to 5.1 million ounces.

Boosting output will likely be a key focus for Goldberg, who served as chairman of the U.S. National Mining Association from 2008 to 2010 and worked at top global miner Rio Tinto (RIO.AX) for three decades before joining Newmont.

The succession plan, developed by the board and O’Brien, will see Goldberg transition into his new role over the next three months, as he focuses on improved performance and delivering profitable growth.

“Our fundamental strategy remains in place, and we will continue to adapt that strategy to capture opportunities, address challenges and respond to market conditions,” spokesman Omar Jabara said.

Reporting by Julie Gordon in Toronto and Bhaswati Mukhopadhyay in Bangalore; Editing by Sriraj Kalluvila, Marguerita Choy and David Gregorio

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