Richard O'Brien

Richard O'Brien
President and CEO

Newmont Mining Corporation

Richard O’Brien was elected President and CEO in 2007. Before joining Newmont he held senior executive positions with AGL Resources, Mirant and PacifiCorp. He has over 25 years of broad financial and operational experience in the energy, power and natural resources businesses. He holds a BA in Economics and a doctor of jurisprudence degree.

 

Watch interview highlights

 

A view from the top

In this short video, Richard O'Brien shares his view on today's key business issues: risk, volatility, innovation, talent, and growth

Quotes

Richard O'Brien

Richard O'Brien

President and CEO, Newmont Mining Corporation

The days of being able to assume that the economy is going to take care of itself are gone.

Richard O'Brien

Richard O'Brien

President and CEO, Newmont Mining Corporation

Nobody wants to talk about revenue increases or just decreasing expenses. We need to do both. As a CEO, that’s what we struggle with every year, every day, and that’s what governments need to do.

Richard O'Brien

Richard O'Brien

President and CEO, Newmont Mining Corporation

For us right now, given the record gold prices and earnings for companies, governments and communities are wondering what share of that should belong to them, and that’s an appropriate question.

Richard O'Brien

Richard O'Brien

President and CEO, Newmont Mining Corporation

It’s one thing to put risk off in, say, a project financing. It’s another to accept and understand the risks and have your partners work together so you’re not putting it off on anybody.

Richard O'Brien

Richard O'Brien

President and CEO, Newmont Mining Corporation

In Europe, for example, we’re going to see less and less financing flowing out of banks that have traditionally been more accepting and desirous of putting money into projects.

Richard O'Brien

Richard O'Brien

President and CEO, Newmont Mining Corporation

Last year’s BP oil spill in the Gulf of Mexico has led many companies to re ask the question, Is enterprise risk management one of those unfortunate check the box activities that every company should be doing because people tell us we should, or is it one that we embrace?

Richard O'Brien

Richard O'Brien

President and CEO, Newmont Mining Corporation

By small “i” innovation, I mean that we can take incremental improvements in many of our operations, whether it’s through business excellence to increase throughput or investments other people have made in innovation and transformed them into our business

Richard O'Brien

Richard O'Brien

President and CEO, Newmont Mining Corporation

Big “I” innovation for Newmont are ideas about changing what we do. Our job is basically to take big rocks and turn them into small rocks. We start with a deposit, and turn it into gold. What if we didn’t have to break the rocks at all? What if we could figure out another way to extract gold? That’s big “I” innovation, because the possibilities of not having to dig a big hole in the first place not only reduces our costs but also makes our business that much more environmentally friendly.

Richard O'Brien

Richard O'Brien

President and CEO, Newmont Mining Corporation

To attract younger people, in the last several years we’ve reached out to community colleges and universities – in the US, Australia, Ghana, Indonesia, and Peru – with internship programmes. Those programmes help students understand what we do, how we do it, and how they can fit in.

Richard O'Brien

Richard O'Brien

President and CEO, Newmont Mining Corporation

We probably missed a whole generation of people coming into the mining business 20 years ago. People were interested in investment banking and IT. Today mining offers tremendous personal growth, operates around the globe, is technically challenging and interesting, and there are great people in the business.

 

Read interview transcript

Click to expand

What is your general outlook for the global economy today, and how confident are you of growth in this environment? What factors are most important to you?

It’s a diverse economy across the world, as we would expect. We have a two-speed global economy, with developed countries growing slower and developing countries growing at a faster pace.

Over the next five years, we’re going to see those come together, as we’re seeing with China, whose economy depends on its abilities to export to other countries. To the extent that those countries are starting to slow down, that malaise may impact the Chinese economy, and we’re beginning to see that. Also, currency unrest and fiscal regime unrest continue to impact our view of the global economy.

So the biggest factor facing the global economy of today is, how do we re-inject growth into countries? If we get that right, then there’s a world of possibilities for the economy. If we don’t, it’s going to be left up to those growing economies to pull the rest of the world along.

The days of being able to assume that the economy is going to take care of itself are gone. We have to be more willing to look at different solutions that are politically tougher. Nobody wants to talk about revenue increases or just decreasing expenses. We need to do both. As a CEO, that’s what we struggle with every year, every day, and that’s what governments need to do.

Access to capital is also a factor. We need make sure the world has the capital it needs to continue to reinvest in people and in fiscal areas that are important to infrastructure.

Looking toward 2012, what is the one risk to Newmont’s growth that you are most concerned about, and why?

Mining around the world is a very local business, one that requires care and respect for local communities, as well as the states or governments within which those communities thrive. For us right now, given the record gold prices and earnings for companies, governments and communities are wondering what share of that should belong to them, and that’s an appropriate question.

The reason it’s a risk is that we can’t answer that question based on what gold prices, or more importantly, what commodity prices mean today, because our business is very long-term. It’s a risk particularly as we look to extract new resources from new places.

As you assess your US and international operations, and the mining industry as a whole, how much do the fiscal positions of the various governments worry you, and what should those governments be doing to allay any worries?

We appreciate governments that look at infrastructure investments and mining in similar ways. Infrastructure investments take a while to recover, thus the word capital. It takes capital to make a business work. It takes return to pay that capital back.

Fiscal policies that hurt include windfall profits taxes, which are put in place to satisfy headline risks for politicians who feel they should get more when prices are higher. But government policies that restrict our ability to have expatriates come in and live for a few years to help train newly appointed nationals influences our ability to deliver on the promise of Newmont becoming their partners.

A good policy is one that recognises, like any infrastructure investment, we’re going to be there for a long time. So let outside people into the country to accelerate the development and coaching of the local workforce. We want a nationally based workforce with national leaders, but with the same standards we deploy in other places in the world.

Beyond economic policies, what’s the one thing governments can do to better support your company?

One of the most important dialogues governments can have with us is connected to our entry into a new place to do business.

To help support that process, we would like to become part of multilateral conversations around responsible mineral development. We would like the opportunity to engage proactively before going into a country, so the government, non-government organisations, and the people have a fair expectation of what mining can and can’t do, and that we have a fair expectation of the environment for mining in a particular country and community.

Recognising the importance of having that dialogue, when Newmont initially explores for a particular mineral, along with your industry tools, do you also bring trust and other relationship-building factors to the table?

It’s becoming more of our practice that we establish trust from the beginning. Newmont was the first mining company in the world to have a community relations review. We reached out into the communities where we’ve been mining for a long time and asked questions about what we do well and what we don’t do well. Armed with that, we’ve begun to change some of our practices. I’d like to say that that makes us totally aware, that we get it and we know just what we need to do, but we’re finding that it’s much more difficult than that. Instead of saying, “We’re big, we’re Newmont, we know how to get it done,” we’re becoming more like, “We know how to do mining right, but we need your help to figure out how to do it right in your community, because what’s right for us may not be right for you.”

We need to be better about that. We need to be more aware. We have a team trying to do that, and we lead the industry in many ways in such practices, but we still have a long way to go.

In light of Newmont’s current growth programme, enacted this year, and the state of the mining industry—gold in particular—in what ways has your overall strategy changed during the past year?

This has been a big year of change for strategy at Newmont. A couple of things headline that. When we entered the year, we had a pretty flat production expectation, and that’s what we told people. We had a dividend policy that was pretty standard fare, relative to the rest of the gold mining industry. That was before April 7, when we had our Investor Day.

As we sit here today, at the beginning of December, we have a much different strategy around growth. We’ve established that we’re going to grow gold production from 5.2 million ounces at the midpoint to 7 million ounces by 2017, and grow copper production from 200 million pounds to 400 million pounds. When we set those expectations, we established some goals regarding our portfolio of assets in order to align the company to reach those goals. In addition to having projects, it takes the right culture, where people know where we want to go, but that we’re going to get there the right way. Because if we step on people trying to achieve our goals, we are not going to make it. We need to recognise that mining impacts people differently, from entering new communities and obtaining permits to getting governments and local communities onboard, all the way through construction operations. I can tell you we’re up for the challenge. The people at Newmont are charged up about getting up that mountain.

Newmont also went from a median level of dividend to now having the industry’s leading policy around a gold-linked dividend. That means gold price increases or decreases actually impact the dividend level investors get at Newmont. We now have the leading dividend by cash per share, as well as dividend yield, in the marketplace. Why did we do that? We recognised that the gold industry shouldn’t just be about gold prices. It should be about people who are interested in an investment that is linked to a safe haven, but that still responds well in a business environment.

One of my big goals for this company is to continue our great operational and technical expertise, and to blend that with the sense that we’re in the business of mining, which means generating shareholders’ returns, as well as stakeholder returns for others. That means we connect the dots, and the dots mean that things like per-share metrics matter, that dividends and return of capital to shareholders matter, particularly in what we believe will be a bullish gold price environment for the next decade.

How has the investment community reacted to those changes?

Very well. In fact, a number of our investors have told us that we’ve changed the conversation around investing in gold. All the gold in the world fills up two Olympic-size swimming pools. There is not very much of it. That’s why it’s called precious. Nobody can make more. We can discover it, we can mine it, but people view gold as inherently valuable. What we’re trying to show investors is that in addition to gold being inherently valuable, Newmont’s management team wants to run a valuable business. It’s the confluence of both.

That’s going to challenge other people in our industry to have a story that is either different from ours, in that they have their own way to go, or that as it’s still the old way of doing gold business. We have changed the conversation. Let’s check back five or 10 years and see if it sticks. I hope it does.

How has building relationships and partnerships become more important to succeed wherever you have operations?

There are a couple of examples. We’ve had a partner in Peru for quite some time, Buenaventura, that helps us understand the local political environment. Importantly, they’re a miner as well, so we can talk to each other about our issues and our opportunities, as well as share technical competence and other information between our two publicly traded companies.

It helps to risk-share with a willing partner, but what’s more important for us is for people to understand the risks they’re taking. It’s one thing to put risk off in, say, a project financing. It’s another to accept and understand the risks and have your partners work together so you’re not putting it off on anybody.

In Europe, for example, we’re going to see less and less financing flowing out of banks that have traditionally been more accepting and desirous of putting money into projects. That means that we’re going to need more local support. We could invest in some projects 100 percent ourselves—we have a big enough balance sheet—but I find that relationships with local entrepreneurs and mining companies is a good way to make sure we get the right support.

It is also important to engage communities in ways that they feel part of the effort, such as local sourcing. We recently completed a study in Ghana, where we do business, showing that a large portion of what we do in terms of putting money back into the community comes from payroll, while the second largest source comes from sourcing our supplies from local vendors. We help them develop products we need and that meet our standards, which involves coaching them and providing them the capacity. Capacity-building is big thing for us, whether it’s the capacity to help people learn new skills, build new things, or supply products and services for the mining business. With those types of relationships, there’s a whole world of possibilities around drawing the community in and providing them benefits.

How is your approach to managing enterprise-level risk changing?

This is a great question, and one for which I can provide a timely answer. Like many public companies, Newmont’s board is interested in enterprise risk management. That means having the knowledge and capability to understand what the various risks are in your company and how you’re going to mitigate or accept those risks. It can be a very intensive process that engages many different people.

We confirmed where Newmont’s biggest risks lie, then asked our people what we might have missed. It wasn’t just a conversation about risk gathering but, more importantly, risk managing.

How has managing risk changed for us recently? Last year’s BP oil spill in the Gulf of Mexico has led many companies to re-ask the question, Is enterprise risk management one of those unfortunate check-the-box activities that every company should be doing because people tell us we should, or is it one that we embrace? And one we embrace understanding that there could be tail events we had previously thought were so remote as to not be worthy of our time thinking how we might manage them.

At Newmont, that doesn’t work. We accept the fact that there will be tail events in the business at some point, and we need to understand how to manage them appropriately. Today we do a much better job of identifying risk and of scenario planning.

The next step is to ensure that we can employ mitigating techniques so that those risks, when they happen, are managed well and don’t hurt the reputation of our company. Because not managing them well will certainly hurt our reputation and, as we’ve seen with BP and other companies, our ability to do business and generate a profit. We make sure that affected stakeholders understand that we have the right mitigating circumstances in place.

Newmont has made substantial investments in safety, environmental, and social initiatives in recent years. How have those sustainability initiatives impacted costs, your corporate reputation, and revenue growth?

At Newmont we take safety as job number one, and have made significant investments in safety training and in innovation to assure that we have safer operations than before. We’ve engaged in more safety conversations with people. Safety is personal, so we want to make sure people understand that they own safety, but we have an environment within which we demonstrate safety every day, from my level right on down. Our goal over the next five years, which we’ve publicly stated, is to be fatality- and serious-injury free in five years.

Newmont’s been a leader in environmental performance in the mining business for some time. We were the first company to adopt the Cyanide Code, a voluntary programme for the industry to promote responsible management of cyanide used in gold mining. Every one of our operations is now cyanide-compliant. We also were one of the first companies to ensure that each of our operations uses the ISO environmental management system.

Newmont has also engaged in a community relations review. In 2009 we published on our website the results of a survey. We worked with outside experts and NGOs so that we could independently assess what we learned from the communities.

How do you define innovation across Newmont’s operations, and how is your approach to innovation changing?

Our approach has changed to recognise that we need both the small “i” innovation and the big “I” innovation. Innovation starts with a cultural change, because without a learning culture, which accepts failure and celebrates success, innovation won’t thrive. In the mining business—and I only judge our company and our conditions—it could be the case that we’ve sometimes focused on our various global operations in vertical space instead of horizontal space.

We think about what’s right for our operations. It could be that somebody has a great idea in one operation, but we haven’t figured out how to share that idea horizontally as well as we could. It could also be that in those vertical operations, whoever sits on top gets to decide how a company innovates, how a company thinks differently. They could help set the tone for whether or not we support learning.

At Newmont over the last couple of years, we’ve had a more global focus on learning and innovation. It’s okay to make a mistake as you try to do things differently, as long as you’ve thought it out and don’t continually make the same mistakes over and over again. That puts my leadership team, as the head of that horizontal focus, in the position of supporting innovation and the right culture to allow it to thrive in the company.

By small “i” innovation, I mean that we can take incremental improvements in many of our operations, whether it’s through business excellence to increase throughput or investments other people have made in innovation and transformed them into our business, such as remote applications.

Newmont has drilling programmes at across the world, and this year, we’re going to spend about $350 million in exploration. If we can explore for less and find more, we’re going to get a higher return. We currently have drill rigs that are remote operated, in places where we want to make sure the conditions are safe. Being able to operate four or five drills at one time remotely also allows us to be more effective.

Another example of small “i” innovation is our use of GPS technology in Ghana, where motor vehicle accidents are the leading cause of death. We have people there who either drive their own vehicles or take buses to work. To promote safe driving, we put GPS devices in employee vehicles and buses. If they’re driving too fast, they receive a signal. We also get the signal, allowing us to warn people to observe speed limits. We’re committed to do our part to reduce those fatalities.

Big “I” innovation for Newmont are ideas about changing what we do. Our job is basically to take big rocks and turn them into small rocks. We start with a deposit, and turn it into gold. What if we didn’t have to break the rocks at all? What if we could figure out another way to extract gold? That’s big “I” innovation, because the possibilities of not having to dig a big hole in the first place not only reduces our costs but also makes our business that much more environmentally friendly.

 In what ways has talent become a strategic issue for you? Are talent challenges different than they used to be, and how are you addressing those challenges?

Our growth strategy, which I explained earlier, also encompasses being able to live our values every day in an environment and culture where people feel that this is a great place to work. It’s people who make that work. We need ideas, technical competencies, financial and business competencies, and relationship competencies, and all those things come from people.

Our gold mining business has become more complex. We’re going to different countries and finding deposits which are more difficult to extract. As a result, we are absolutely thirsty for more competent, and sometimes just more, employees. So meeting our talent needs is absolutely one of the highest risks and opportunities we have. We embrace that as a management team, at every level in the company.

Then, we have to look at our different talent needs in our different markets around the world. Each region has its own economy. For instance, while the United States has 9 percent unemployment, Western Australia can’t find enough people for its mining activities and is actually looking to import employees.

In the United States, we probably missed a whole generation of people coming into the mining business 20 years ago. People were interested in investment banking and IT. Today mining offers tremendous personal growth, operates around the globe, is technically challenging and interesting, and there are great people in the business. So I’m hopeful that we’re going to be able to attract people to our business. We’re starting to attract some technically inclined people out of the schools today, but there are fewer mining schools and mining engineers—at the same time there’s more demand for them.

We need strategies to accomplish our goal of providing talent on a continual basis. We need to retain older people who have technical skills and want to continue to work. Do we adopt new policies where people can work part-time or work from home?

To attract younger people, in the last several years we’ve reached out to community colleges and universities—in the US, Australia, Ghana, Indonesia, and Peru—with internship programmes. Those programmes help students understand what we do, how we do it, and how they can fit in.

In what ways have the requirements for senior leadership positions throughout Newmont changed?

There are several. First, as the mining business has evolved, we’ve had to get beyond just being the best technical people in the world. We need to be better businesspeople, who understand why we make investments, what the risks are, and what the return should be. We need to have a number of different competencies.

We also need to make sure people get different points of view, who don’t stay in just one job. Their aspiration should be to learn about the business from the 360-degree perspective. That makes for a better employee. So we have rotational assignments, from the senior leadership level down. We move people around the globe so that they have different experiences and different perspectives.

Diversity is also important for us. We encourage employees around the world to take different points of view. We do business on five continents, but when I go to Indonesia, I meet experts from Peru. Here in our Denver headquarters, we employ Peruvians, Ghanaians, and Indonesians. Promoting people and making them prominent is important, too. For the first time in Ghana, where females are an important part of the workforce, we have two Ghanaian women on our leadership team.

You talked about moving people across borders. Is that done to fill talent gaps? What are the skills, levels, or functions you’re moving most often and to what regions?

First, it’s important to decide where you want to end up. If we move to a new region and find a new deposit, we want national employees to run the business in that country. We also want those employees to learn how to work in a global organisation so that, should they desire, they can go from being a leader there to being a leader at Newmont’s Denver office.

When we go to a new country, it’s often the case, too, that people we may want to hire don’t have the same standards of performance that we have developed over our 90-plus years in business. So how we address things like safety, environmental policies, and community relations are critical. We actually have some programmatic ways to accelerate performance.

You talked earlier about working with colleges and universities. How are you collabourating with educational institutions or governments to better develop a pipeline of future employees?

There are a couple of examples. One, Newmont has people around the world who are competent technical leaders. We make those people available to help with some of the institutions who are in the mining business. For instance, we have a couple of people in Denver who teach part-time at the Colorado School of Mines. We help the mining educational institutions by giving them feedback on curriculum and ideas about the kinds of graduates we’re looking for. We also contribute to their educational funds by establishing scholarships. Important, as well, are the internship programmes mentioned earlier.

You have certainly had a very busy year—on top of everything else that’s going on in the global economy. In what ways has the allocation of your time and attention changed over the past year, and will there be a return to “normal” any time soon?

The new normal is volatile. The new normal is more engagement with communities and governments and with my own employees around the world. Over the last year my time has changed pretty dramatically.

When I became CEO at Newmont, about five years ago, I spent a great deal of time understanding our operations and what we could do to improve them. I spent time building our management capability. That’s changed quite dramatically, too.

I’ve been more externally focused, investing my time with people who work at levels below the people who report directly to me, to ensure that we have a long-term capability. That requires that I get to know the top leaders in the company, spend time with them. I find myself doing more and more of that.

Importantly, over the last year, gold has been in the headlines for multiple reasons. We’ve seen it hit an all-time high price of $1,900 per ounce. That’s perhaps illustrative of where world economies might go. A preeminent financial writer said that the price of gold is “one divided by fear.” As people think about that, they wonder, what is gold really telling people? As a consequence, I spend time talking to people about what direction I think gold is going.

Perhaps most important, through the World Economic Forum, the International Council of Metal and Mining, and the World Gold Council, our industry is engaging with the communities of the world about how we can do our job better. We have been changing the reputation of the mining industry step by step.

So when I look back at my calendar compared to a couple of years ago, it’s much more externally facing, more strategically oriented. As a CEO, that’s the right place for me to be. It does mean, though, I need to spend enough time here to ensure that I have the right team looking after the business. We like to say we’re all working at the right level, we know what our assignment is, and what we’re supposed to take on, and we need to be sure we’re actually doing that.

I feel that I’m working at my right level. I actually embrace the fact that it’s going to be different for me, for my calendar, for my company. I think it’s terrific.