Barrick Deal Influenced McEwen Resignation From Goldcorp

TORONTO (CP) - Rob McEwen says concerns over the debt Goldcorp Inc. will take on under its pending deal with Barrick Gold Corp. influenced his decision to retire as chairman.

After 18 years, McEwen resigned as Goldcorp's CEO in February following the company's merger with Wheaton River, but had stayed on as chairman. He dropped that post last month, two days before Barrick [NYSE:ABX; TSX:ABX] announced its C$10.8-billion hostile takeover of Placer Dome [NYSE:PDG; TSX:PDG], facilitated by a side deal with Goldcorp [NYSE:GG; TSX:G].

Goldcorp and Barrick held confidential negotiations for two months before striking the deal that will see Goldcorp buy some Placer Dome assets for $1.35 billion, if Barrick's hostile takeover is approved.

McEwen's resignation - after 19 years with Goldcorp - was announced on the same day as the deal, Oct. 31.

Ian Telfer, who replaced McEwen as Goldcorp's CEO this year, told reporters at the time that McEwen left because he had too much on his plate. Telfer also said he wasn't concerned about the debt Goldcorp could be taking on and he intends to decrease it over time.

On a conference call with reporters Tuesday, McEwen was asked to comment on Goldcorp's deal with Barrick.

"My philosophy of gold mining is if you're going to go into gold mining you want it to be profitable, you want to be at the bottom of the cost curve and I have avoided debt wherever possible," he said, speaking from Denver.

Telfer's growth philosophy is different, suggested McEwen, who still owns about 3% of Goldcorp.

"When you deliberately put in a new CEO, you can't expect them to operate the same way that you do," McEwen said.

Wheaton River, under Telfer, had a history of growth through acquisitions using debt, he said. "Metal prices improved and these properties that were high-cost at the time ended up being very good investments."

Goldcorp, on the other hand, "avoided debt, and we stayed at the bottom of the cost curve."

"So, you have two different approaches, and philosophically, I like organic growth. I like low cost and I like no debt. But it's not the only way to grow a business," McEwen said.

But that philosophical difference played a role in his decision to leave Goldcorp, he acknowledged.

"You end up with a dissident," he said. "You're saying 'This is how I've pursued business,' but I recognize it's not the only way to be successful."

He applauded the fact that the deal with Barrick - which will see Goldcorp pick up Placer Dome's Ontario assets - will consolidate the province's Red Lake district, something he said has been a long-time goal of his.

"And should it be successful, it will have a larger production base," he said.

McEwen is now concentrating on his position as CEO and chairman of a Denver-based junior explorer, U.S. Gold Corp.

He said people are asking why he would leave Goldcorp, which has a market value of about C$8 billion, to focus on a C$60-million dollar company.

The chief executive said the growth possibilities that U.S. Gold has in comparison to a major miner was another factor behind his decision to leave Goldcorp.

McEwen owns about 33% of U.S. Gold, and said exploration is the basis for success in mining and that by starting out small, juniors are better positioned for growth.

Goldcorp grew at an annual rate of 31% after 1993, he said, "and I was saying, 'What's going to keep it doing that?' And I thought I should probably be looking at a startup situation where you can get that type of growth again."

At U.S. Gold, McEwen is looking to consolidate a number of the juniors that are currently exploring in Nevada. He believes gold is headed for a period of exponential growth similar to that experienced by the technology sector a few years ago. But it will be a while yet.

"We're far from that at the moment," he said. "I think five years out, we're going to see gold testing $850 an ounce."

(c) The Canadian Press 2005

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