Lihir Gold Ltd’s chief executive Arthur Hood is going out at the top, or so it seemed from the company’s announcement yesterday.
The gold miner announced his surprise decision to leave after more than five years running Lihir, during which he drove a dramatic transformation of the group.
Mr Hood said it was the right time to make an orderly transition to a new CEO.
His departure announcement contained the good news for shareholders that the company had met guidance for 2009 production, which totalled 1.12 million ounces.
Guidance was for 1.1 million to 1.2 million ounces.
The company appointed chief financial officer Phil Baker as interim CEO as it looks for a leader.
"LGL is now one of the world’s leading gold producers and is consistently performing very well, with excellent growth options for the future," Mr Hood said in the statement.
"It is therefore the right time for me to step aside to enable an orderly transition to a new CEO."
But there is the matter of the botched purchase of gold interests in and around Ballarat in Victoria that cost Lihir some $400 million.
Media reports this morning claimed Mr Hood was some sort of sacrifice to appease upset investors.
A decision late last year to start paying dividends was described as the last step to try and improve relations with big investors.
However, Mr Hood said that after more than four successful years as CEO, he had achieved his primary goal of overseeing the transformation of LGL from a single mine operation to a multi-mine company producing in excess of one million ounces of gold per year.
“LGL is now one of the world’s leading gold producers and is consistently performing very well, with excellent growth options for the future,” he said. “It is therefore the right time for me to step aside to enable an orderly transition to a new CEO.”
Lihir chairman, Dr Ross Garnaut paid tribute to Mr Hood for his contribution to the company.
“Arthur has successfully led LGL through a major growth phase which has seen production increase from around 600,000 ounces per year in 2005 to more than 1.1 million ounces in 2009, with diversified operations in Papua New Guinea, Australia and West Africa.
"He built a strong management team to take the company forward into its next phase of growth, and under his stewardship the group’s financial position has been significantly enhanced," Dr Garnaut said.
LGL’s share price has increased from $A1.63 at the announcement of Arthur’s appointment in September 2005 to $A3.29 on Friday, and the company is now ranked among the world’s largest gold producers.
But it has been higher and one analyst was quoted this morning as describing Lihir under Mr Hood and Dr Garnaut as a ‘value destroyer’.
The shares rose to $3.32 yesterday in the wake of the announcement of Mr Hood’s departure.
That was more a sign that he has left the company in a good position, thanks to some tough decisions.
Perhaps the biggest was to end the heavy hedging policy that Lihir maintained.
That saw huge paper losses, but has now seen the company ride soaring world gold price at the right time, enabling it to boost earnings.
The surge in the value of the Australian dollar against the US currency and cost pressures might trim some of the obvious gains when the 2009 full year profit is released next month.
The company said Mr Hood’s termination package includes a cash payment of $A2.3 million and 3.5 million share rights previously awarded.
Mr Hood has four weeks to elect to retain these share rights for their respective three year terms or to receive shares or cash equivalents on a pro-rata basis.
If he chooses to retain the rights, the extent to which they will vest will remain subject to company performance in accordance with the terms of the shareholder-approved executive share plan.
In addition, Mr Hood will receive a cash payment of A$1.3 million in lieu of share rights that he would have been entitled to in the current year, had his contract run its full term.
Mr Baker has been CFO at LGL since January 2007.
Lihir said the bulk of his career has been in the mining industry, including 22 years at MIM in a variety of senior management roles.
Mr Baker will present the company’s production report for the fourth quarter of 2009 this Friday January 22.
"LGL’s production for the full year of 2009 was another record at 1.12 million ounces, in line with guidance for the year of 1-1.2 million ounces. Total cash costs for the year were also in line with guidance provided to the market (below US$400/ounce excluding Ballarat).
“The company’s operational performance has been excellent,” said Mr Baker. “I look forward to providing full details on January 22,” Mr Baker said.
